LU to Merge Stage6 with Four of its Video Sites Representing Over 200
Million Page Views and Pay DivX, Inc. $11 million in Cash & Carriage plus
Equity Stake in Stage6 and Promotion of DivX Software
- After LiveUniverse makes its first offer, DivX Board refuses to engage in
any direct dialogue with LiveUniverse for over 5 days, and during this
time, DivX shuts down Stage6
- Directors of public companies have a fiduciary duty to shareholders to
try to get the best deal and represent their interests, first and foremost
- DivX Board's decision to destroy website and its community when there was
and is a firm superior offer on table from LiveUniverse raises questions of
whether proper sales process was followed
WEST HOLLYWOOD, Calif., March 7 /PRNewswire/ -- LiveUniverse Inc., a
leading interactive online entertainment network, today reported that it
continues to be rebuffed by the Board of Directors of DivX, Inc. in
LiveUniverse's attempt to: i) receive a proposed sales price or counter
offer for sale of assets of Stage6.com from the Board, ii) confirm
acceptance of LiveUniverse's latest offer presented today and detailed
below, or iii) publicly disclose reasons why LiveUniverse's current offer
is inferior to shutting down Stage6.
LIVEUNIVERSE OFFERS DIVX $11,000,000 + EQUITY PARTICIPATION TO ACQUIRE
ASSETS OF STAGE6.
-- Consideration is combination of cash, stock, online carriage, and
promotion of DivX software
1) LiveUniverse was and is willing to execute a definitive agreement
immediately and close the transaction within approximately 72 hours.
2) After acquiring controlling interest in Stage6, LiveUniverse will merge
Stage6 with four of its video entertainment websites that in aggregate
generate over 200 million page views per month. The combined entity
would be one of the top video sites online with over 400 million
monthly page views. DivX will receive a 10% equity interest in the new
entity.
3) LiveUniverse shall pay DivX $3,000,000 in cash.
4) LiveUniverse shall issue $5,000,000 in online advertising carriage to
DivX. DivX will promote its products and services across
LiveUniverse's network of music, video, and social networking related
websites receiving over 40 million unique monthly visitors. This will
result in less marketing money spent by DivX. (standard rate card)
5) LiveUniverse's Revver property will provide technical services,
including leveraging its Revver Wrapper technology to properly track
and share revenue with content creators. This will help to drive
interest in and grow the Stage6 site.
6) DivX/LiveUniverse Strategic Partnership over 36-month period: DivX and
LiveUniverse would partner to sell DivX products across the
LiveUniverse network. LiveUniverse would receive standard affiliate
fees and commit to promote DivX across its network of properties.
LiveUniverse will generate enough sales to earn at least $1,000,000 in
affiliate fees from sales of DivX software products over a 36-month
period. Any shortfall will require LiveUniverse to pay for the
under-delivery. Typically an affiliate fee is 15-20% of revenue
generated, therefore LiveUniverse would need to sell approximately
$5 million in DivX products during the agreement term.
7) LiveUniverse will also contribute a license for its new LiveVideo
community technology to vastly improve the Stage6 user experience and
grow the community.
8) DivX shareholders will receive 10% of the new company. DivX may have
the right to "put" this stock position to LiveUniverse to purchase if
it elects after 36 months, whereupon LiveUniverse would be forced to
buy this 10% position via the "put." Such "put" to LiveUniverse shall
cause LiveUniverse to pay DivX an additional $3,000,000 in cash.
LiveUniverse is standing by to engage with DivX and complete a
transaction.
WHAT CAN SHAREHOLDERS DO?
Shareholders and users of Stage6 can rally at
http://www.livevideo.com/SaveStage6 to take initiative and proactively push
the Board to do the right thing for shareholders. Shareholders may post
messages, videos, and chat amongst themselves to help rally DivX management
to reopen discussions with LiveUniverse or other interested parties.
Despite daily outbound calls and emails, LiveUniverse was and is unable
to reach any of the DivX executives including General Counsel David Richter
who LiveUniverse was originally referred to for the purposes of buying
Stage6.
KEY ARTICLES SHED LIGHT ON SOME TROUBLING STORIES OF INTERNAL ISSUES
BLOCKING FAIR PROCESS/FIDUCIARY DUTIES OF BOARD FROM BEING FOLLOWED:
The Street Column by Tim Beyers on 2/29/2008
LiveUniverse does not believe shareholders are getting the full story
from DivX management and notes a recent article by the Street's Tim Beyers
who noted that some of the disclosure by the former CTO of DivX does not
jibe with the disclosure by DivX on the same topic. Beyers' mention of DivX
in its entirety can be found at the bottom of this press release. Beyers'
mention of this issue appeared in his Feb 29 column entitled, "Thursday's
Worst Stocks In The World." The full text article can be found online at:
http://www.fool.com/investing/general/2008/02/29/thursdays-worst-stocks-in-
the-world.aspx
2/26/2008
TechCrunch's Michael Arrington posted an article -- "Serious Drama, and
Lots Of Stupidity, Behind Stage6 Shutdown"
"Yesterday San Diego based DivX announced the shutdown of popular video
site Stage6, to the surprise and dismay of the site's 17.4 million happy
monthly visitors (the post on the shutdown has over 5,000 comments).
There's lots of speculation around why DivX is shutting the site down,
ranging from piracy issues to the spiraling CDN costs of streaming all that
HD content. But what really happened, according to multiple sources, is
that a ridiculous battle of egos at the DivX board level caused most of the
team to simply quit. DivX, essentially, snatched defeat from the jaws of
victory."
Montgomery Securities
LiveUniverse also notes how DivX's investment banker Montgomery
Securities is currently a defendant in federal court with Judge King
related to Montgomery's role in misleading Intermix shareholders regarding
the sale of MySpace. Intermix shareholders have filed a complaint against
Montgomery Securities indicating that Montgomery created inaccurate
fairness opinions and knowingly facilitated the sale of 100% of MySpace for
$370 million in implied value. Most analysts today concur that MySpace,
which is double the size of Facebook (which itself was recently valued at
more than $15 billion by Microsoft about two years after the MySpace sale)
is the #1 social networking platform worth significantly more than Facebook
today.
"All we can do is keep trying to connect and make a deal," said
LiveUniverse CEO Brad Greenspan. "We also think it is poor form for DivX to
shut down access to the entire community on three days warning and lock out
access to friends' lists and other user data that people invested lots of
time building. We want to immediately reactivate user access to this data
even as we attempt to negotiate a buyout that would restore the website."
POOR OR LACK OF SALES PROCESS BY DIVX NEEDS TO BE EXPLAINED TO
SHAREHOLDERS
LiveUniverse urges shareholders to contact DivX directors and
executives and request they either engage in a process with interested
buyers or further disclose the mysterious circumstances around why DivX has
not run a process to sell the Stage6 website even though public disclosure
indicates an exhaustive process was followed.
Case in Point: LiveUniverse had never been contacted by Montgomery
Securities, the investment bank handling the sale for DivX and running the
sales process. Never contacted before, LiveUniverse read an article on the
shut down and proactively contacted Montgomery on February 29.
LiveUniverse is located in Southern California and is one of the only
companies in the U.S. that has purchased another high-profile video website
over the past 60 days (in this case Revver.com which was widely reported on
CNET and other industry sources that DivX and Montgomery were very likely
aware of). Yet despite both these qualifications, LiveUniverse was never
contacted or informed of the opportunity by Montgomery Securities or DivX.
Therefore shareholders of DivX should inquire and demand to understand
what Montgomery Securities did, how much they were paid, and why they did
not contact obvious candidates that were likely buyers of DivX such as
LiveUniverse.
LiveUniverse notes that Montgomery Securities is currently a defendant
in Federal Court against Intermix Shareholders, a previously
publicly-traded company, that alleges that Montgomery Securities failed to
run any process before Intermix management and that Montgomery pushed
through a transaction to sell Intermix and MySpace to News Corp. At the
heart of the case in front of Judge King in California Federal Court,
Montgomery and Thomas Wiesel created fairness opinions that attempted to
justify the now glaringly low approximate $370 million that shareholders
received for 100% of MySpace.
"It's amazing to me that a publicly-traded company would just not care
to take the time to try to maximize an asset it has taken so much
shareholder money to develop," said Greenspan. "I have been personally
sending follow-up calls and emails, I have made multiple bona-fide offers
and also indicated we were flexible to explore any structure on any terms.
We have told DivX thru these emails that if they do not like what we are
offering, then they should propose what terms they would sell on. Instead
the management of DivX has decided that radio silence, shutting down the
site, and simply pushing traffic from Stage6 to Veoh.com, a former
competitor, is the 'easiest' solution for them. However the EASY route is
not always the BEST route for maximizing value for SHAREHOLDERS."
HISTORY
On Wednesday, February 27, after reading that Stage6.com was being
shuttered by DivX, LiveUniverse's Business Development team contacted
DivX's CEO and was put in touch with General Counsel David Richter who
referred the company to DivX banker Montgomery Securities.
Montgomery Securities indicated that indeed Stage6.com was being shut
down that evening and sent LiveUniverse some basic background information.
Montgomery said LiveUniverse could make a bid because the site was being
shut down, and therefore any bid that provided upside for shareholders
would likely work because it would be incremental for shareholders versus
shutting the site down.
LiveUniverse submitted a bid proposal on Thursday evening, February 28.
LiveUniverse did not hear back from Montgomery Securities with any feedback
until Wednesday, March 5, when Montgomery called and indicated the Board
had not reviewed LiveUniverse's bid until Monday, March 3, and was not
interested in proceeding but would not provide any details or reasons why
not.
LiveUniverse last spoke with a DivX Board Member on Friday, February
29, who indicated the Stage6 website was indeed available to be purchased
and indicated Mr. Richter would call LiveUniverse that day. The Board
member then instructed LiveUniverse to send an email to the Board Member
and Mr. Richter indicating a desire to engage in a transaction.
LiveUniverse followed the Director's instructions and LiveUniverse has not
received any emails back from Mr. Richter or other DivX Directors or
executives related to engaging in or working on a transaction to this day.
About LiveUniverse
LiveUniverse is one of the world's largest online entertainment
networks, led by Brad Greenspan, the founder of MySpace. LiveUniverse
operates several successful and popular websites across three core
verticals: Video, Social Networking & Music. The LiveUniverse network is
visited and reaches over 40 million unique visitors per month and over 400
million page views.
Contacts:
Financial Relations Board
Saskia Sidenfaden / Kathy Price
(212) 827-3771 / (213) 486-6547
ssidenfaden@frbir.com / kprice@frbir.com
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