Bulking Up 4x Video Capabilities NeuLion Buys DivX For $62.5 Million

NeuLion, a provider of live and on-demand content for the web, has bought DivX LLC, a provider of digital video distribution technologies in a cash and stock deal worth at least $62.5 million.

The Plainview, NY-based company, which trades on the Toronto Stock Exchange, will bulk up its ability to distribute 4K video and “over-the-top” services with the acquisition of San Diego-based DivX, according to a statement.

The deal, which is something of a reverse-merger, bringing DivX’s talent into the top spots at NeuLion is the latest in a long string of deals for the itinerant video technology developer, DivX.

It marks at least the third time that DivX has changed hands among various owners. Most recently, in October, the company was spun out of Rovi in a $75 million deal orchestrated by Parallax Capital Partners and the StepStone Group.

At $62.5 million, DivX seems to be adhering to a law of diminishing returns with each subsequent acquisition. The company was initially acquired by Sonic for over $320 million before Sonic was sold to Rovi.

Analysts from Futuresource Consulting cited by NeuLion report that 4K adoption is expected to grow from 2015 to 2018, with 100 million shipments, or 38% of all new televisions shipped, by 2018.

NeuLion’s content partners include the NFL, NHL, NBA, UFC, Rogers and CCTV. The acquisiton of San Diego-based DivX brings consumer electronics device manufacturers like LG, Samsung, Toshiba, and Hisense under the NeuLion umbrella as well, according to Kanaan Jemili, DivX’s chief executive.

With the deal, Nancy Li, NeuLion’s chief executive, Nancy Li, will become the executive vice chairman of the NeuLion board. Meanwhile, Jemili will take over as NeuLion chief executive.

NeuLion’s new purchase also bolsters the company’s board, with DivX chairman and Parallax Capital Partners managing partner, James Hale, and StepStone Group partner, John Coelho, both taking seats.

The cash and stock deal for DivX includes the distribution of $37.5 million shares of NeuLion common stock and $25 million two-year convertible note. NeuLion is issuing 35,890,216 shares at a price of $1.045 per share based on the five-day volume-weighted average price as of market close on December 24, 2014.

Needham & Co. provided a fairness assessment of the transaction.