Technicolor said it will spin off its creative studios division into a new independent entity specializing in visual effects and animation.
The France-based technology services company, whose roots in the entertainment business date back more than a century, will remain publicly traded on the Euronext Paris exchange. The main company will continue to focus on a range of services, from connected homes to broadband-delivered entertainment. It plans to retain a 35% stake in Technicolor Creative Studios and list TCS on the Euronext Paris. Majority control will go to Technicolor shareholders via a distribution-in-kind transaction.
Earlier this year, Technicolor overhauled its effects operations, grouping previously separate divisions under the Moving Picture Company (MPC) banner. MPC had gained notice for its work on films like 1917 and the 2019 remake of The Lion King. Its more recent credits include Ghostbusters: Afterlife, Cruella and West Side Story.
Other major players are moving to capitalize on the surge of demand they’re seeing due to the streaming boom. Earlier this year, UK-based DNEG, which has done visual effects for Dune and No Time to Die, announced it would go public via a SPAC deal worth $1.7 billion. The firm also has a division dedicated to animation.
Technicolor’s spinoff news came as the company also announced second-half and full-year results that matched company forecasts but reflected a volatile operating environment. Total revenue dipped almost 4% in 2021 to €2.9 billion, though adjusted earnings before interest, taxes, depreciation and amortization jumped 65% over the Covid-affected 2020 to reach €268 million.
The new structure, with two independently traded entities, will enable each to pursue its own strategy and unlock more value, the company said.
In order to facilitate the activities of the twin entities, Technicolor said it will lower its debt via a refinancing, with €300 million in convertible notes turning into Technicolor shares upon the studio unit’s spinoff.
The company also said it had received a “binding offer” to sell its trademark licensing operations for €100 million in cash, with that deal expected to close in the first half of 2022.
“We have yet again proved our ability to react quickly and efficiently to unexpected challenges,” CEO Richard Moat said of the company’s 2021 performance. After reviewing its strategic options, he added, “we determined that pursuing the partial spin-off of TCS from the Group along with the full refinancing of the existing debt will be the solution that best aligns strategy, value creation and financial objectives for all of Technicolor’s stakeholders.”
Technicolor shareholders will vote on the spinoff plan at the company’s annual meeting in June, with the company aiming to close the transaction in the latter part of the third quarter.
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