Broadcast graphics giant ChyronHego to be acquired by Vector Capital

For the second time in a week, a major broadcast graphics technology provider has been acquired by a private equity firm. ChyronHego has entered into a definitive merger agreement with Vector Capital to acquire all outstanding shares of ChyronHego common stock for $2.82 per share in cash. The deal comes just one week after fellow broadcast-graphics giant Vizrt was acquired by private-equity firm Nordic Capital.

“I think our customers — sports and otherwise — should see this as something very positive,”  ChyronHego President/CEO Johan Apel told Sports Video Group Monday. “I’ve spoken to some of our largest customers, many of them in the sports [sector], and they are all very supportive. We think this deal will be very beneficial for all parties; it represents good value to our stockholders first and foremost, but it’s also the right answer for our customers. With a strong financial backer, we will have the resources to invest even more in R&D and technology and extend our product overall.”

After much turmoil in 2012 (including a delisting notice from NASDAQ), Chyron acquired Hego in March 2013 and rebranded the new company ChyronHego. In the year and a half since, the two companies have worked to integrate their graphics and virtual-tracking technologies into new offerings for the broadcast and digital markets and picked up several major contracts (including MLB Advanced Media’s player-tracking system). The new roadmap looks to have succeeded thus far as the company posted its first profit in three years during the second quarter of this year.

“We have turned the company around in many different ways,” says Apel. “The numbers have been better lately, and we have new products coming out all the time. We have managed to integrate the technologies from the Chyron and Hego side into new products that have extended our offering. We are in pretty good shape, but that’s not to say that we can’t do things better — and we will.”

By the Numbers

A special committee of the ChyronHego board of directors and the disinterested directors of the board have unanimously approved the Vector agreement and recommend that ChyronHego’s stockholders approve the transaction. The purchase price represents a premium of approximately 18% over ChyronHego’s average closing share price for the six months ended on November 14 and a premium of approximately 230% on the closing stock price on March 8, 2013, the day prior to the announcement of the merger between Chyron and Hego. The price also represents a 4% premium over the company’s closing share price on November 14 after a significant increase in the price in recent months.

The transaction is subject to customary closing conditions, including the approval by holders of two-thirds of ChyronHego’s outstanding shares, as well as a non-waivable closing condition requiring the approval by holders of a majority of the shares held by the ChyronHego stockholders, who will not become stockholders of the entity resulting from the transaction. A portion of the shares of ChyronHego common stock beneficially owned by Apel and other members of the management team will be exchanged for equity interests in the acquiring entity rather than cash in the merger so that they will continue to be equity holders following the transaction.

“We are pleased to have reached this agreement with Vector, which provides significant value to our stockholders,” said Roger Ogden, chairman of the special committee of the ChyronHego board of directors. “The disinterested directors of the board believe that this transaction will provide ChyronHego with the flexibility to innovate and execute our vision for the benefit of all constituencies.”

The company will file a proxy statement with the Securities and Exchange Commission (SEC) with respect to the Vector transaction, and a shareholder meeting will be held following the SEC’s review. ChyronHego expects the merger to be completed in the first quarter of fiscal 2015.

Under the terms of the Vector agreement, ChyronHego intends to solicit alternative acquisition proposals from third parties during a seven-week “go-shop” period, following the date of execution of the agreement. ChyronHego and its management will be free to accept superior proposals from third parties during this time, subject to the procedural conditions set forth in the Vector agreement. There can be no assurance that this process will result in a superior proposal. The company and the special committee do not intend to disclose developments with respect to the solicitation process unless and until the special committee and the board have made a decision with respect to any potential superior proposal.

“We are very excited about working with the talented group of employees at ChyronHego to take advantage of the significant long-term opportunities in broadcast graphics creation, playout, and realtime data visualisation,” said David Fishman, managing director, Vector Capital. “We believe, with strong capital backing, the company will be well-positioned to capitalise on the exciting trends in the sports, news, and live-television markets.”

Vector has secured committed financing consisting of a combination of equity and debt.

Nick Lukens, VP, Vector, said, “We are thrilled about ChyronHego becoming part of the Vector family. Through our partnership with management, we are committed to strengthening and expanding ChyronHego’s market-leading product and service capabilities.”

In connection with the execution of the Vector agreement, Apel, the directors, executive officers, and certain significant stockholders, who currently own approximately 51% of the outstanding shares, have agreed to vote their shares in favor of the merger.

Duff & Phelps is acting as financial advisor to the Special Committee, and Mintz, Levin, Cohn, Ferris, Glovsky & Popeo is serving as ChyronHego’s legal advisor. Shearman & Sterling is acting as Vector’s legal advisor.

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