Forbes | Technicolor To Spin Off Visual Effects Unit As Public Company As Part Of Major Reorganization

Entertainment services and hardware giant Technicolor announced a major reorganization, with plans to spin off its Creative Studios division as a separate company, issue convertible debt to reduce leverage, will change its top management, and sell its trademark-licensing unit.

Technicolor plans to spin out 65 percent of its Creative Services unit under a tax-free return of assets to shareholders under French law. The spinoff will be presented to shareholders for approval at the annual meeting in late June, and is anticipated to close in the third quarter.

The resulting company, like Technicolor, would be listed on the Euronext Paris bourse. Technicolor will consider other options for disposing of the remaining 35 percent of its Creative Studios assets, with an intention to reduce debt for both entities, it said.

“After a comprehensive review, 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,” CEO Richard Moat said. “We are convinced that this operation is a unique opportunity to ensure both TCS and Technicolor Ex-TCS have the adequate capital structure to support their developments, long-term ambitions and organic growth. The execution of these operations will allow both companies to pursue their own strategic agendas, be more agile and ultimately thrive as independent businesses.”

The Creative Services unit provides visual-effects and related services and technology to film, television, game, advertising, and streaming-video companies in Hollywood and beyond. It has several notable, specialized VFX and animation studios, including MPC, Mikros Animation, The Mill and Technicolor Games. The division’s studios also rely on a large production pipeline based in India, and have built an in-house Academy training program to grow its own talent base for the highly technical work.

As evidence of the busy sector, Technicolor said both MPC and Mikros Animation already are two-thirds booked for next year’s projects. In that, they are similar to many other top post-production shops across the industry, which are doing wall-to-wall business as major streaming services continue to order work for dozens of projects in the superheated battle for audience market share.

With the refinancing and new note issuance, a standalone Creative Studios unit is “expected to benefit from a leverage in line with market peers” in the capital-intensive and highly competitive VFX industry, the company said, offering “a unique ‘pure play’ equity story in a market experiencing exponential growth driven by burgeoning demand for content.”

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