Sonic to buy DivX for about $323 million

(Reuters) - Digital media company Sonic Solutions SNIC.O agreed to acquire video compression software maker DivX Inc DIVX.O for about $323 million in cash and stock to boost its Internet-based video delivery products.

The deal values DivX's stock at about $9.83 per share, which represents a premium of about 41 percent over its Tuesday closing price of $6.95.

The deal will help Sonic expand its relationships with retailers and consumer electronics manufacturers, making it more convenient for them to distribute digital video content over the Internet.

DivX is best known for its codec software, which helps users watch videos across different media players.

In 2009, 70 percent of DivX's revenue came from licensing its technology to original equipment manufacturers, original design manufacturers and integrated circuit manufacturers.

Last year, Samsung (005930.KS) and Sony Corp (6758.T) accounted for 13 percent and 12 percent, respectively, of DivX's revenue.

DivX's rivals include Apple (AAPL.O), Adobe Systems (ADBE.O), Google (GOOG.O), Microsoft (MSFT.O) and RealNetworks

(RNWK.O).

Sonic expects the acquisition, which is scheduled to close in September, to potentially double its adjusted earnings in 2012.

Sonic said it will pay $3.75 per share in cash and 0.514 shares for each share of DivX.

In case of termination, DivX will have to pay a fee of $8.35 million, the companies said.

Sonic, whose key products include PhotoSuite and CinePlayer, is a maker of a range of digital media software and runs the cloud-based Roxio CinemaNow online movie and TV distribution service.

The company has been developing a Web-based infrastructure that lets studios and retailers sell copies of movies and television shows directly to consumers.

It has a tie-up with technology retailer Best Buy Co Inc (BBY.N) for online movie downloads.

For the fourth quarter ended March 31, Sonic said it earned 4 cents a share on revenue of $26.4 million.

Sonic forecast first-quarter revenue of $25 million. This falls short of analysts' expectations of $26.5 million, according to Thomson Reuters I/B/E/S.

DivX shares, which have gained 43 percent in value in the past six months, rose about 30 percent to $9.05 Wednesday before the bell.

Shares of Sonic were down 7 percent at $11.02 in pre-market trade. They closed at $11.83 Tuesday on Nasdaq.

(Reporting by S. John Tilak and Manasi Phadke in Bangalore; Editing by Anil D'Silva, Anne Pallivathuckal)