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Gemstar faces hostile offer

United Video Satellite Group makes a hostile offer to merge with the multimedia company for approximately $2.8 billion.

United Video Satellite Group announced yesterday that it made a hostile offer to merge with multimedia company Gemstar International Group for approximately $2.8 billion or $45 per share in cash.

United Video shares fell more than 2 percent to $38.5 today, down from yesterday's close of $39.38. The company's stock has traded as high as $44.25 and as low as $19.75 during the past 52 weeks. Gemstar shares rose--barely--to $43.06 from a previous close of $42.50. The stock has traded as high as $45.75 and as low as $15.13 during the past 52 weeks.

United Video, which provides TV and radio programming via satellite, said Gemstar had until midnight yesterday to accept the offer. After that deadline, the company said it planned to make the offer directly to Gemstar's public shareholders.

"In light of management's previously expressed opposition to our offer, we suggest that, as a matter of good corporate governance, the board establish a special committee of independent directors of the company, with its own financial advisors and legal counsel to negotiate the terms of the definitive agreement," said Gary Howard, United Video chairman and chief executive officer, in a public letter to Gemstar's board. "We are prepared to move expeditiously to work with them."

The current offer represents nearly a 50 percent premium over the closing share prices of Gemstar at the time the offer was first offer made on March 13, and a 16 percent premium over the July 2 closing price.

Viacom, which directly owns about 6 percent of Gemstar's outstanding shares, has informed United Video that if the merger proposal were to be voted on at a meeting of shareholders of Gemstar, Viacom would vote its shares in favor of such a proposal.

"Combining United Video and Gemstar represents an opportunity that will benefit multiple constituencies and resolve pending litigation between the two organizations," United Video president and chief operating officer Peter Boylan said in the letter.

Litigation between United Video and StarSight Telecast, a subsidiary of Gemstar, is currently pending in an Oklahoma federal court. The litigation involves alleged infringements of several StarSight patents by United Video.

Gemstar executives were not immediately available for comment.

Reuters contributed to this report.