MobiTV, Inc. – Court Approves $23.9mn ($17.4mn Cash) Asset Sale to Xperi/TiVo, with Sale Set to Close by June 1st

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May 21, 2021 – The Court hearing the MobiTV cases issued an order approving the sale of substantially all of the Debtors’ assets (the “Sale”) to TiVo Corporation ("TiVo," $17.4mn cash purchase price, plus up to $6.5mn in cure costs and employee-related obligations, see below) [Docket No. 292]. The TiVo asset purchase agreement, not previously filed, is attached to the order as Exhibit A.

In June 2020, TiVo consummated its merger into Xperi Corporation, and the common stock of both Xperi Corporation and TiVo Corporation were de-registered. Xperi’s common stock now trades on Nasdaq Global Select Market under the ticker symbol “XPER.”

On May 12, 2021, further to the Court’s April 7th bidding procedures order [Docket No. 164] and an auction carried out on May 11th and 12th, the Debtors notified the Court that they had selected TiVo as the successful bidder for substantially all of their assets, with a group comprised of Amino Technologies (US) LLC, Roku, Inc., and RPX Corporation ($16.7mn bid) named as the backup bidder [Docket No. 234]. Xperi issued a press release announcing the TiVo acquisition on May 12th. A declaration filed in support of the sale by the Debtors' investment banker FTI, noted that there were 8 qualified bidders in total: "(i) Aire Technology Limited; (ii) Amino Technologies (US) LLC ('Amino'); (iii) Roku, Inc. ('Roku'); (iv) RPX Corporation ('RPX'); (v) Streaming TV Acquisition LLC; (vi) TiVo Corporation ('TiVo'); (vii) TV2 Consulting, LLC; and (viii) Vobile, Inc."

The May 12th notification provided: "the Successful Bid’s purchase price consists of $17,400,000 in cash plus the payment of certain cure amounts and the assumption of certain other liabilities in an amount up to approximately $6 million. The Backup Bid’s purchase price consists of $16,700,000 plus the payment of certain cure amounts and the assumption of certain other liabilities on approximately the same terms and conditions as the Successful Bid."

Background

On March 1, 2021, MobiTV, Inc. and one affiliated debtor (“MobiTV” or the “Debtors,” who provide end-to-end internet protocol streaming television services (“IPTV”) filed for Chapter 11 protection noting total assets of approximately $19.0mn and total liabilities of approximately $75.0mn.

On April 7, 2021, the Court hearing the MobiTV cases issued an order approving (i) bidding procedures for the sale of substantially all of the Debtors’ assets (the “Sale”) and (ii) a timetable culminating in a May 11, 2021 auction and May 21, 2021 sale hearing [Docket No. 164].

As noted at filing, the Debtors’ prepetition marketing efforts were unsuccessful at generating any interest in an out-of-court sale and they will now try to revitalize that process within the Chapter 11 framework. To date, no stalking horse has been named although the Debtors claim that 11 parties have signed NDAs or are “in the process of finalizing the terms” of an NDA.  

In a declaration in support of first day filings, the Debtors stated: “The Company ultimately concluded that given the significant challenges in achieving positive free cash flows in the near term, the business likely would not be viable on a stand-alone basis absent a strategic transaction. Further, in light of the Company’s most recent marketing process, and the desire of potential acquirers to purchase the Company’s assets free and clear of any liabilities, the Company believed it would be unable to consummate a strategic transaction out of court – especially given its limited available liquidity.”

Key Terms of the TiVo APA:

  • Seller: MobiTV, Inc., a Delaware corporation (“MobiTV”), and MobiTV Services Corporation
  • Purchaser: TiVo Corporation
  • Purchase Price: On the terms and subject to the conditions in this Agreement, as consideration for the Purchased Assets, at the Closing, Purchaser shall pay to MobiTV for the benefit of Sellers the initial aggregate amount in cash of $17.4mn (the “Purchase Price”). At Closing…Purchaser shall promptly pay all Cure Amounts (if any) up to the Cure Amount Cap ($4.0mn) as determined by the Bankruptcy Court with respect to each of the Transferred Contracts and assume and perform and discharge the Assumed Liabilities (if any) under the Transferred Contracts pursuant to the Assignment and Assumption Agreement. Liabilities for Transferred Employees is capped at $2.5mn.

Marketing and Sale Process

The motion [Docket No. 73] states, “Despite growing revenue and increasing subscriber and customer bases, the Debtors have been incurring substantial operating losses — the Debtors generated a net operating loss of approximately $34 million in calendar year 2020. Although the Debtors projected significant and material subscriber and revenue growth for 2020, the COVID-19 pandemic and related stay-at-home orders materially impaired the Debtors’ projections and growth opportunities. As a result, the Debtors had limited liquidity and were at risk of defaults under their various debt agreements.

Accordingly, the Debtors ultimately concluded that due to the significant challenges in achieving positive free cash flows in the near term, the business likely would not be viable on a standalone basis absent a strategic transaction. In July 2020, the Debtors engaged FTI Capital Advisors, LLC (‘FTICA’) to assist the Debtors in their evaluation of strategic alternatives. The Debtors, with FTICA’s assistance, evaluated various avenues to improve the Debtors’ liquidity and financial position, including a structured marketing effort to secure new debt or equity capital partners to provide for a refinancing of the Debtors’ existing secured indebtedness (the ‘Prepetition Loan Facility’) to Ally Bank (the ‘Prepetition Lender’), the Debtors’ sole prepetition secured lender, as well as to provide operating liquidity to fully bridge the Debtors’ business plan to provide positive cash flow in 2022.

As part of the prepetition marketing process, the Debtors and FTICA contacted seventy-nine (79) potential capital sources and investors, ranging from strategic investors, venture capital funds, third party lenders and media and technology focused investors, twenty-two (22) of which executed non-disclosure agreements. While the Debtors entered into advanced negotiations with several parties, including periods of exclusive negotiation with several potential investors, negotiations to structure an acceptable out-of-court strategic transaction were ultimately unsuccessful. In light of the results of, and feedback received during, the Debtors’ prepetition marketing efforts, the Debtors determined it would be unable to consummate a strategic transaction out of court while retaining sufficient liquidity for operations.

Accordingly, prior to the Petition Date, the Debtors engaged in extensive negotiations with the Prepetition Lender and one of the Debtors’ most vital, cornerstone customers, T-Mobile USA, Inc. (‘T-Mobile’), regarding, among other. things, a potential auction sale process in the context of a chapter 11 case. Ultimately, the Debtors, the Prepetition Lender and T-Mobile mutually determined that, among the strategic alternatives to be considered, the Debtors should prepare for a potential sale process that could be implemented through the filing of the Chapter 11 Cases to maximize the value of the Debtors’ estates.

[w]ith the assistance of their proposed advisors, the Debtors intend to continue their prepetition marketing efforts post-petition to structure a recapitalization of the company through a plan or sale. In this regard, the Debtors, with the assistance of their proposed financial advisor, FTI Consulting, Inc. (‘FTI’), continue to actively market the Assets. As of the date of this Motion, FTI has circulated ‘teasers’ and non-disclosure agreements to eighty-five (85) potential purchasers, of which eleven (11) such parties have executed non-disclosure agreements or are in the process of finalizing the terms of a nondisclosure agreement. Furthermore, FTI has prepared a confidential information memorandum and populated a data room for potential purchasers to conduct due diligence on the Assets.

The Debtors seek approval of bidding procedures that will facilitate FTI’s efforts to identify a purchaser or plan sponsor to complete the restructuring. Concurrent with the sale process, the Debtors intend to operate their business in the ordinary course of business and maximize the value of their assets in accordance with the terms of an agreed budget with the Secured Lenders.”

Bid Protections that could be paid by the Debtors in the event a Stalking Horse Bid Agreement is reached include a 3% break-up fee, a $150k expense reimbursement, a $200k minimum initial overbid requirement and a $100k minimum bid increment.

About the Debtors

According to the Debtors: “MOBITV is a creative thinking technology company making TV better. Our mission is to create a video platform that makes it easy to watch the content you love regardless of how the market changes. We power a fully IP-based approach and, in combination with the almost two decades of expertise in IP video delivery, operators can finally make the switch to a truly future-proof TV solution. 

The Stevens Declaration adds: “Founded in 2000, the Debtors are the first company to bring live and on-demand television to mobile devices and are a leader in application-based television and video delivery solutions. More specifically, the Debtors provide end-to-end internet protocol streaming television services (“IPTV”) via a proprietary cloud-based, white label application (the ‘IPTV Application’). The IPTV Application is fully customizable, allowing the Debtors’ customers, generally television operators, broadband providers, and cellular device carriers, to provide a fully branded and customized video streaming platform on retail devices such as Roku, Apple TV, Amazon Fire TV, Xbox, and smart TVs, as well as other devices utilizing Android and iOS operating systems to their subscribers.

In support of the IPTV Application, the Debtors have secured certain transportation rights (the ‘Transportation Rights’) by which the Debtors provide content through the IPTV Application from over 375 leading video content providers such as HBO, Fox, the Walt Disney Company, Viacom, NBC, CBS, and others. The Transportation Rights held by the Company, coupled with the IPTV Application, simplify the content sourcing and delivery mechanics required to provide high quality streaming services to consumer end users through a single application feed, and significantly reduce the costs of the Company’s customers to provide content to their subscribers.

In this regard, the Company holds key contracts with T-Mobile USA, Inc. (“T-Mobile”) and over 120 cable/broadband television (also referred to as ‘pay TV’ or ‘premium television’) providers to deliver streaming content to over 300,000 end-user subscribers via business customer-specific branded iterations of the IPTV Application.

In support of the Debtors’ operations and IPTV Application, and as of the Petition Date, the Debtors utilize the services of approximately 86 employees in critical functions such as engineering, sales and marketing, operations, and back office and administrative positions. Most of the Debtors’ employees are based in the Company’s Emeryville, California headquarters. The Debtors also utilize the services of eight independent contractors and certain staffing firms based in India.”

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