NeuLion Buys DivX For $62.5M

Says Deal Will Accelerate Move Into 4K, Expand OTT Efforts – See more at: http://www.multichannel.com/news/tv-everywhere/neulion-buys-divx-625m/386616#sthash.5UIVFHQE.dpuf

PLAINVIEW, NY–(January 05, 2015) – NeuLion, Inc. (TSX: NLN), the leading enabler and provider of live and on-demand content to Internet-connected devices, has signed a definitive agreement to acquire DivX LLC, a leading provider of next-generation digital video solutions.

The transaction will place the combined company at the forefront of the global shift to 4K video and Over-The-Top services in the fast-growing online video market. According to Futuresource Consulting, 4K adoption is forecast to grow quickly from 2015 onward with over 100 million shipments projected in 2018, representing 38% of the total TV market. As live and on-demand secured streaming of content continues to move to digital platforms, NeuLion and DivX together will be a leader in the space from both a technology platform and consumer experience perspective. Bringing together NeuLion’s managed services and DivX’s technology products, NeuLion will be able to give customers the choice of either building and managing digital video platforms internally or licensing a fully integrated managed services solution.

“By delivering interactive viewing experiences to consumers watching live and on-demand content on digital platforms, from desktop to mobile to connected devices, NeuLion has built a roster of the best known brands in professional and college sports and TV Everywhere, such as NFL, NHL, NBA, UFC, Rogers and CCTV. Now, we are extending our franchise and bolstering our capabilities with our acquisition of DivX’s entertainment and consumer electronics customers, advanced 4K video enabling technology products and expansive geographic reach,” said Nancy Li, chief executive officer of NeuLion.

Added Kanaan Jemili, DivX’s chief executive officer, “As a leading provider of next-generation digital video technologies for Over-The-Top services across consumer electronics devices and mobile platforms, DivX has licensed its technology to global brands spanning consumer electronics manufacturers, entertainment content rights holders and cable network operators, such as LG, Samsung, Toshiba and Hisense. With our recently introduced end-to-end HEVC solution, DivX is helping to drive adoption of 4K video and live streaming. We are excited about the opportunity to extend our reach into the global marketplace while we continue to create technologies that bring high quality viewing experience to digital media consumers.”

Expanded Management Team with Global Reach
Upon closing of the transaction, Nancy Li, NeuLion’s chief executive officer, will become executive vice chairman of the NeuLion board of directors and will drive the technology vision for the company, and Kanaan Jemili, DivX’s chief executive officer, will be appointed chief executive officer of NeuLion. The management teams and employees of both companies will be combined. NeuLion will now have offices and sales reach throughout North America, Europe and Asia.

Expanded Board of Directors
Upon closing of the transaction, James Hale, DivX’s chairman and managing partner at Parallax Capital Partners, LLC, and John Coelho, a member of DivX’s board of directors and partner at StepStone Group LP, will join the NeuLion board of directors. As a result, NeuLion will expand its board to 11 seats.

Terms of the Transaction
Under the terms of the definitive agreement, the total value of the transaction is approximately $62.5 million, consisting of $37.5 million in shares of NeuLion common stock and a $25 million two-year convertible note, subject to working capital adjustments. At closing, NeuLion will issue 35,890,216 shares of common stock at a set price of approximately $1.045 per share based on the five-day VWAP for the stock as of the market close on December 24, 2014.

NeuLion management expects the transaction to be accretive on a GAAP operating income basis for 2016 and immediately accretive on a non-GAAP adjusted EBITDA basis. For the six-month period ended September 30, 2014, the period DivX has been a stand-alone private company, DivX had estimated GAAP unaudited revenues of $10.8 million and estimated non-GAAP revenues of $26.6 million, and an estimated GAAP unaudited consolidated net loss of $7.4 million and non-GAAP Adjusted EBITDA of $3.5 million. A reconciliation of the GAAP to non-GAAP figures can be found in a table at the end of this release.

The transaction, which has been approved by the boards of directors of NeuLion and DivX, is expected to close in the first quarter of calendar 2015 subject to customary closing conditions.

Needham & Company provided a fairness opinion to NeuLion’s board of directors.