Plaintiff Jordan Rosenblatt, who holds TiVo common stock, has filed a class action complaint against defendant TiVo Corporation et al. for violating the Securities Exchange Act in connection with a proposed merger. In December 2019, TiVo announced the proposed merger with Xperi Corporation, XRAY-TWOLF HoldCo Corporation, XRAY Merger Sub Corporation, and TWOLF Merger Sub Corporation. The proposed class represents TiVo public stockholders.
TiVo’s board agreed to the proposed merger. Under the agreement, TiVo shareholders will receive 0.455 shares of HoldCo common stock. As a result of the transaction, “Xperi stockholders will own approximately 46.5% and TiVo stockholders will own approximately 53.5% of the new parent company on a fully diluted basis.” There will be changes to company leadership and a new Board. The new company will be called Xperi, but still provide TiVo’s entertainment services under its brand name and other Xperi brands, such as DTS, HD Radio and IMAX.
TiVo and Xperi filed a Registration Statement with the Securities and Exchange Commission (SEC) for the proposed merger. Rosenblatt alleged that the Registration Statement does not include certain information about the transaction, making the statement false and misleading in violation of the Securities Exchange Act.
The plaintiff alleged that the Registration Statement does not include material information about TiVo’s, Xperi’s, and the newly merged company’s projected financials. For all projections for all companies, it does not state “(i) all line items used to calculate (a) Adjusted EBITDA, (b) EBIT, and (c) Unlevered Free Cash Flow; and (ii) a reconciliation of all non-GAAP to GAAP metrics.” The plaintiff argued this information is important because “it provides stockholders with a basis to project the future financial performance of a company, and allows stockholders to better understand the financial analyses performed by the company’s financial advisor in support of its fairness opinion.”
The plaintiff suggested that the Registration Statement did not disclose information about the analyses financial advisors undertook for the proposed transaction. For example, for LionTree’s Sum-of-the-Parts DCF Analysis, the defendant’s statement omits “all line items used to calculate unlevered free cash flows,” “the terminal values,” the “basis for applying ranges of terminal multiples,” “the individual inputs and assumptions underlying the discount rates,” “the estimated consolidated net debt used by LionTree in the analysis,” and the “number of fully diluted shares outstanding of” TiVo and Xperi common stock. The plaintiff argued that the methods used for valuation must be included to show a fair transaction. Finally, Rosenblatt noted that the statement did not include information as to conflicts of interest or NDAs for the parties.
Plaintiff has sought to prevent the “proceeding,” “consummating, or closing” of the Proposed Transaction, for Defendants to disclose the omitted material facts, declaration of Exchange Act violations, award of attorneys’ fees, and other relief as determined by the Court.
Barring any delays due to the litigation, the transaction is expected to go through during the second quarter of 2020.
Rosenblatt is represented by Rigrodsky &Long. The complaint was filed in the Delaware District Court. Xperi’s financial advisor for the proposed transaction was Centerview Partners and its legal advisor was Skadden, Arps, Slate, Meagher & Flom. TiVo’s financial advisor was LionTree Advisors LLC and its legal advisor was Cooley LLP.