After more than two years of trying, Technicolor has finally completed the sale of Grass Valley - to private equity fund Francisco Partners, writes David Fox.
As of January 1, 2011 Grass Valley began doing business as an independent company. The deal values it at $100 million and takes in all of the current Grass Valley Broadcast & Professional business, including its camera, content repurposing, editing, master control, modular products, news production, production automation, routing, servers, storage, and switching product lines including their entire product portfolios, the R&D centres and factories around the world, the sales & systems activities and customer support organisation worldwide, as well as the management and administrative support functions dedicated to the business.
In a letter to customers, Grass Valley CEO, Jeff Rosica (pictured) wrote: "The entrepreneurial spirit and 'can do' attitude that has distinguished the company since its founding is at the core of our organization and will be reinforced and be more visible throughout the new Grass Valley."
Despite the uncertainty and worldwide financial crisis of the past two years, he claimed that Grass Valley has continued to innovate with new product features like Fusion, and invest in R&D. "Our goal is to deploy the most efficient, highly collaborative workflows imaginable. Working with the new Grass Valley, you’ll find tremendous flexibility and a stronger integration than ever before across our new products," he wrote. "We have a secure future, are operating independently again, and are focused on continuing the growth and success of our company."
According to Technicolor, the terms of the deal remain the same as those agreed in July, which were: an $80m promissory note issued to Technicolor with a six-year maturity and bearing a capitalized interest of 5% per year. The amount of the note represents the value of the business minus the present value of retirement liabilities transferred; the transfer by Technicolor of a net amount of €20m of cash required for the ongoing management of the activity; the right for Technicolor to receive additional consideration from the buyer based on the potential future remuneration of the new owners of the disposed entity.
The San Francisco-based fund has more than $7 billion of capital under management, and is focused exclusively on investments in technology and technology-enabled services businesses.
Technicolor restructuring almost over
Technicolor has also received a binding offer (for a "non material" amount) from the German private equity fund, Parter Capital Group for the former Grass Valley transmission business. This business brought in about €43m in 2009 and accounted for 11% of the total Grass Valley revenues and 26% of the operating loss. It had 291 employees operating in five countries. Parter hopes to use the Thomson trademark for the business. The disposal will include TV and radio transmitter product lines, antennas, and scientific applications, associated R&D centres and sites worldwide, sales and customer support organizations, systems activities, and the various management and support functions.
This means that most of Technicolor's non-strategic activities have now been disposed of. The activities sold to date account for more than two thirds of the total revenues of activities included in its disposal programme, with just the head end business and PRN, its digital signage company, still to be sold.
Technicolor is to issue new shares worth about €213m to pay back creditors after failing to sell assets fast enough during its restructuring process. It had issued some €265m of debt in disposal proceed notes (DPN) during its 18-month restructuring process, for which it was given protection by French courts. These DPNs were supposed to be paid back through asset sales before December 31.
It will now repay the notes with €52.3m in cash from the $60m sale of most of its 50% share of Screenvision in September, and the issue of 50 million new shares at €4.255 each.
For more on the Grass Valley sale, read our previous article - Equity Fund to Harvest Grass Valley