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Loeb Partners weighs in against Macrovision-Gemstar merger

Investment firm, which has a small stake in Macrovision, calls on other investors to scrutinize rationale for the $2.8 billion deal.

Investment firm Loeb Partners announced Thursday plans to vote against copy-protection developer Macrovision's $2.8 billion acquisition of Gemstar-TV Guide International.

While Loeb Partners and its affiliates hold a small 2.1 percent stake in Macrovision, it's calling on other investors to weigh in and push the company hard on explaining its rationale for the deal. Macrovision is in the business of developing digital rights management technologies and content protections, while Gemstar-TV, in which News Corp. holds a 41 percent stake, offers entertainment guides.

"In light of the fact that Macrovision has failed in certain other expensive initiatives... we will vote against the transaction, as the synergies seem vague, the combination of two voluminous patent portfolios does not...seem impressive and worthy of turning Macrovision into what market participants term a 'show me stock'...and the horrible reception of capital markets to this seismic event seem to bring on too high a possibility of long term failure," Gideon King, Loeb executive vice president, stated in a letter to Macrovision management on Wednesday.

Shares of Macrovision have dropped 22 percent since the deal was announced on December 7 to close at $15.99 a share Wednesday. That's on top of the 21 percent stock drop on the day the deal was announced, over the previous day's close of $25.99 a share.

According to a report in MarketWatch, investors were spooked by how Macrovision would finance the deal. Meanwhile, the Street.com noted in a column that integration concerns also weighed on analysts' minds.

Macrovision and Gemstar-TV Guide, in announcing the deal, had highlighted such benefits as allowing users to access extensive and secure libraries of commercial and personal content on a variety of devices through intuitive guides. The companies cited as an example that users could turn to their TV and pull up a guide and receive personalized content and information on their favorite shows or access personal photos and music library.

While the Loeb folks note they have met with Macrovision's chief executive, Alfred Amoroso, in recent days, their concerns still persist. Loeb Partners, however, also notes it reserves its right to change its mind on how it will vote and any changes in ownership of Macrovision shares.

Macrovision and Gemstar have previously said they expected the deal to close in the early part of the second quarter.

Awaiting comment from the folks at Macrovision...

UPDATE: Thurs., 10:51 a.m. (Pacific), Jan. 10, 2008

A spokesman for Macrovision declined to comment, other than to note that "investors are free to make their own decisions" and that the company continues to believe "this is a compelling business combination."