DivX Agrees to Sell Itself to Roxio-Maker Sonic
The trend toward movie studios’ distributing their works online fueled Roxio maker Sonic Solutions’ bid for DivX, executives of the companies told investors Wednesday. DivX, a maker of video encoding and copy protection systems agreed to sell itself to Sonic for about $123 million in cash, plus 16.9 million Sonic shares -- about $300 million total at Wednesday’s close. The deal requires approval by the companies’ investors. The executives said they don’t expect it to raise antitrust concerns with regulators.
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The acquisition, expected to close by October, will help the companies accelerate deployment of their video technologies across devices and through retail partners, Sonic CEO David Habiger said. “The studios launch formats and we help them get their content from the studios to your home,” he said. “It just so happens that this latest one is … ‘over the top'” online video. “We are certainly in a better strategic position with DivX, given their footprint on CE devices."
Sonic expects to announce new retail partners for online video distribution in coming weeks, Habiger said. “We expect to continue to see new storefronts, retailers and partnerships and devices for it,” he said. “In the coming week or two, you'll see another flurry of those types of announcements,” Habiger said. Partners for Sonic’s RoxioNow platform typically control the timing of those announcements, but those partners and CE and retail partners of DivX’s and Sonic’s won’t wait until CES 2011 to make their plans known, he said. “This is not a wait-until-CES-type of space right now."
Despite acquiring DivX, Sonic will continue to support other codecs and digital rights management solutions with its RoxioNow platform, Habiger said. “We will still have to maintain a master cloud that helps the studios cater to different codecs, different file formats and DRM, because that’s in the best interest of the customer and the studios,” he said.
DivX also benefits from combining with Sonic, DivX CEO Kevin Hell said. DivX technology is already built into a broad variety of CE devices, he said. “The combination of the RoxioNow services with this device footprint will allow us to accelerate our licensing business, particularly in the U.S., where we've had lower penetration in the past,” he said. DivX shares gained 26 percent Wednesday, closing at $8.79. Sonic shares fell 9 percent and closed at $10.71.