Smart Money Are Not Betting on Merger Between These Two Companies

COMSCORE, Inc. (NASDAQ:SCOR) said that it will buy Rentrak Corporation (NASDAQ:RENT) in an all-stock deal, creating a firm that provides analytics and data services for the web, mobile, media, television and marketing industries which may rise to rival dominant player Nielsen Holdings PLC (NYSE:NLSN). Shares of COMSCORE and Rentrak each gained over 8% and nearly 13% in after-hours trading after the announcement. However, Insider Monkey data show that hedge funds either did not foresee this development, or considered that a potential deal will not bring a lot of value, which is not surprising taking into account that both stocks have declined significantly since the beginning of 2015.

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COMSCORE, Inc. (NASDAQ:SCOR) said that the acquisition of Rentrak Corporation (NASDAQ:RENT) in which each Rentrak share will be converted to the right to receive 1.5 shares of COMSCORE, is expected to close in early 2016. COMSORE shareholders are expected to own about 66.5% of the combined firm while Rentrak shareholders will own the other 33.5% on a fully diluted basis. The deal will be mildly dilutive to non-GAAP EPS in 2016, the firm noted, and will be accretive the following year. The deal has been approved by both of the companies’ Board of Directors.

The acquisition, in which Rentrak will become a wholly-owned subsidiary of COMSCORE, will create a combined firm that is best positioned to provide measurement services to the media and advertising industries, the firms said, aimed at following the consumer across multiple media consumption platforms. Serge Matta, COMSCORE chief executive officer, said in a statement that the combination is all too timely because of the advent of digital technology warranting the need for cross-platform measurement systems. This is especially important as the way people consume media has been rapidly changing as can be seen in the rise of video-on-demand services and Internet media consumption. The combination of the firm’s knowledge, experience and expertise is expected to form a unique company which they say cannot be rivaled by any other organization.

Serge Matta will become the CEO of the combined company, while Dr. Magid Abraham will retain his post as Executive Chairman of the Board. Bill Livek, Rentrak’s current Vice Chairman & CEO, will become the company’s Executive Vice Chairman & President. Mel Wesley will likewise stay as the firm’s Chief Financial Officer, while David Chemerow, Rentrak’s current COO & CFO, will become a strategic advisor to the CEO, particularly in the integration of the two firms.

According to our data, COMSCORE, Inc. (NASDAQ:SCOR) experienced a decline in hedge fund sentiment in the second quarter, with the number of hedge funds long the stock dwindling by three to 21. There was also a 20.35% decrease in the value of hedge fund holdings, amid a 4.02% appreciation of the stock, as hedge funds ended the quarter with $180.2 million worth of stock, representing 8.30% of the company. Donald Chiboucis’ Columbus Circle Investors owned 1.19 million COMSCORE shares by the end of June, down by 8% from the end of March. Pivot Point Capital, led by James A. Noonan, held 728,408 shares of the firm by the end of the second quarter, down by 7%.

Correspondingly, the number of funds bullish on Rentrak Corporation (NASDAQ:RENT) declined by one to 17 during the second quarter. Furthermore, while the company’s stock jumped by 25.63% during the second quarter, the total value of holdings of these funds amounted at $95.68 million, equal to 9% of the company at the end of June, an increase of just 19.51% over the quarter, which points to an outflow of hedge fund capital from the stock. Chuck Royce’s Royce & Associates owned 488,210 shares of Rentrak by the end of the second quarter, up by 7% from the end of the first quarter.

Disclosure: None