Gemstar’s Stock Rises 5% Despite ‘Poison Pill’

Shares of Gemstar International Group rose nearly 5% on Monday as the Pasadena company hired advisors to evaluate an unfriendly takeover bid. But the company continued to insist it isn’t for sale.

Moreover, Gemstar adopted a “shareholder rights” plan to ward off the $2.8-billion offer from United Video Satellite Group. Gemstar also expanded a licensing pact with Microsoft Corp., a rival to cable giant Tele-Communications Inc., which controls United.

Tulsa, Okla.-based United, a producer of print and on-screen TV listings, last week went public with its offer for Gemstar, creator of VCR Plus and other interactive TV services.

Over the weekend, Gemstar announced it had retained investment banking firm Lazard Freres & Co. and the law firms Sullivan & Cromwell and O’Melveny & Myers to review the $45-per-share offer. But Gemstar repeated that it is not for sale, and its new shareholder-rights plan--also known as a “poison pill” because it is designed to make a hostile takeover prohibitively expensive--underscored that view.

Under the plan, if a single party buys more than 15% of Gemstar’s stock, all other Gemstar shareholders will be able to double the number of shares they already own by buying new stock for a penny per share. Gemstar’s board also increased the percentage of outstanding stock one would need to buy to gain control of the company, from 51% to 66.7%.

Gemstar shares rose $1.88 to close at $42 on Nasdaq. United fell 13 cents to $33.88 on the same market. Some investors have viewed the United bid as too low, so would be happy if the deal were thwarted.

But the poison pill may soon be moot because United is close to withdrawing its bid, according to a source close to the company.

On Sunday, Gemstar announced that it had expanded a 7-month-old licensing agreement with Microsoft, which includes an interactive program guide in its WebTV systems. The new agreement calls for both companies to cooperate more closely on advertising, marketing and technical matters.

That was sure to roil United’s major shareholder, TCI. It has been waging a long battle with Microsoft to prevent the software behemoth from controlling the operating system inside TV set-top boxes, which the cable industry hopes will turn televisions into Internet gateways.

The new Microsoft deal makes Gemstar less valuable to United, the source said. United could withdraw its bid as early as today, he said.

United President Peter Boylan couldn’t be reached Monday for comment.

* Times staff writers Sallie Hofmeister and Melinda Fulmer contributed to this report.