ComScore and Rentrak to Merge in Bid to Challenge Nielsen

The two companies are set to combine in a stock-for-stock merger.

ComScore is set to acquire Rentrak in a stock-for-stock merger, it was announced Tuesday.

The transaction could create a powerhouse digital and TV measurement firm that will challenge Nielsen.

ComScore was founded in 1999 as one of the earliest companies created to measure the popularity of websites in the midst of the Internet bubble era, while Rentrak was founded in 1977 to measure more traditional media, including home video sales box-office results.

Today, Rentrak is a major player in television, measuring live TV as well as recorded TV and VOD, and along with ComScore it could be a more formidable competitor with Nielsen, the analytics company founded prior to the invention of television but known best for its iconic TV ratings that have such sway over ad rates.

As of the close of trading Tuesday, ComScore had a market capitalization of $1.6 billion while Rentrak's was $666 million. With a market cap of $16.6 billion, though, Nielsen will still dwarf the merged ComScore-Rentrak.

Under the terms of the deal, each share of Rentrak will convert to 1.15 shares of ComScore, so ComScore shareholders will own roughly two-thirds of the merged company.

The boards of directors of both companies have already approved the merger, which is expected to close next year, and once the companies are combined Rentrak will have four board seats to ComScore's eight.

Synergies are expected to save the merged companies $20 million in 2016 and $35 million in 2017, executives said during a conference call on Tuesday.

Wall Street appeared very enthusiastic about the plan, with Rentrak shares surging 13 percent after the closing bell Tuesday while ComScore shares jumped 7 percent. After the merger, the company will trade on Nasdaq under ComScore's current ticker symbol, SCOR.

WPP, the world's largest advertising company, will have a 16 percent stake in the newly merged company, given that it was a minority stakeholder in both Rentrak and ComScore, though it will not have a board seat.

After the merger, Rentrak will be operated as a wholly owned subsidiary of ComScore, with ComScore CEO Serge Matta remaining in that role and Dr. Magid Abraham remaining executive chairman of the board. Rentrak CEO Bill Livek will become the merged company's executive vice chairman and president.

The combined company will have annual revenue of $457 million with $267 million in cash on hand. Earnings before interest, taxes, depreciation and amortization will be about $100 million annually. 

The two companies said in a joint announcement that, once merged, they'll be "setting the standard for the next generation of cross-platform measurement solutions."