What: Shares of TiVo (NASDAQ:TIVO) were soaring Thursday on rumors that the entertainment company would merge with Rovi Corporation (NASDAQ:ROVI). As of 1:33 p.m. EST, TiVo stock was up 21.3%.

So what: The New York Times reported Thursday morning that the DVR-maker was in "advanced negotiations" to be sold to Rovi, one of the largest patent owners of digital entertainment devices. TiVo shareholders would receive a combination of cash and stock, though the price has not yet been determined. A merger would give TiVo shareholders about 30% ownership of a combined company.

The two companies are considered competitors, meaning a deal could make the combined company more profitable. However, Rovi shares did not react favorably to the news, falling 4% in afternoon trading.

Activist Glenn Welling of Engaged Capital pushed for the deal after acquiring two seats on Rovi's board last year, and with TiVo searching for a new CEO, the timing was opportune.

Now what: No dollar figure has been assigned to the deal yet, and The New York Times' sources said the merger could still fall apart. However, a buyout would clearly be in TiVo's interest. Before the announcement, the stock had fallen nearly 50% since a peak in August, and the company has struggled to deliver bottom-line growth as the television landscape shifts.

With merger talks now in the open, the stock could continue moving higher on anticipation for a deal.