The shareholders of French audiovisual group and STB maker Technicolor have overwhelmingly approved the increased offer from US technology investment firm Vector Capital for a stake in the company.
The transaction, which was agreed at the Technicolor…
The shareholders of French audiovisual group and STB maker Technicolor have overwhelmingly approved the increased offer from US technology investment firm Vector Capital for a stake in the company.
The transaction, which was agreed at the Technicolor general shareholders’ meeting on 20 June, will now take place in two stages.
The first step sees the French company initially issue approximately 47.47 million shares through a reserved capital increase to Petalite Investments, an investment vehicle controlled by Vector. The latter will pay €2 per share after it upped its original offer from €1.9 to €2.0 in response to the increased modified offer by JP Morgan Chase.
In the second stage, Technicolor will issue 61.64 million shares to be sold at €1.56 per share in a rights issue. Vector has irrevocably committed to subscribe up to 75% of the amount of the rights issue to ensure its success.
Depending on the level of participation of existing shareholders in the rights issue, Vector’s final stake in Technicolor will be between 18% and 29.94%.
Technicolor states that it will receive proceeds of between €167m and €191m from the capital increases. It plans to use these to reduce its debt burden, increase headroom for financial covenants and help the group implement its “Amplify 2015” strategic roadmap, which outlines the company’s plans over the next three years to significantly de-lever while increasing both adjusted EBITDA and free cash flow generation.
Technicolor added that the transaction will further stabilise its shareholder base with Vector publicly expressing its long-term commitment to the French company. To that end, two Vector representatives, Alexander Slusky and David Fishman, will join the Technicolor board upon completion of the reserved capital increase.
Technicolor will now file a prospectus with the Autorité des marchés financiers (AMF) relating to the capital increases and the timetable for their completion.
The successful shareholder vote was a validation of Vector’s argument that its offer was superior to the rival proposal by JP Morgan Chase despite the Technicolor board recommending the latter’s original offer.
Via its investment vehicle Jesper Cooperatief, JP Morgan’s initial bid on 2 May comprised a €1.6 per share reserved capital increase and a €1.56 per share rights issue. In response to Vector’s rival proposal on 25 May, JP Morgan then upped the reserved capital price to €1.9 per share.
However, the Technicolor board rejected both the original Vector offer and JP Morgan’s revised plan arguing that the original Jesper offer, though smaller, contained more favourable terms.
Despite its increased price, Vector claimed that the amended JP Morgan offer was ‘neither economically superior nor in the best interests of shareholders.’
The technology investment firm claimed that both its original and increased offers would result in less dilution to the existing Technicolor shareholders as it has a larger rights issue tranche. Vector also said that its offer would result in greater proceeds for the French company and that independent proxy advisory firms ISS, Glass Lewis and ProxInvest all recommended the Vector bid.
SatelliteFinance understands that Morgan Stanley is the sole bookrunner on the capital increase, while FTI Consulting and Lazard are advising Vector on its bid. Davis Polk & Wardwell is providing legal advice to Technicolor.
