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Technicolor Sells Off Thomson Video Networks

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Piece by piece, the Thomson technology group that started with the purchase of Technicolor in 2000, is being dismantled. While the recent sale of Grass Valley Group made big headlines, there's another sale to keep an eye on: today's announcement of the sale of the Thomson Video Networks assets to a surprising buyer.

A decade ago, Carlton, which was then the second-biggest shareholder in the UK's ITV television group, chose to sell Technicolor to France-based Thomson. The price tag of that transaction was £1.4 billion (approximately $2.04 billion USD at the time the transaction was completed).

Thomson took on the Technicolor name, which is well known in film and digital media circles, and continued to expand its empire. Yet it began to show signs of weakness in 2009 and, by early 2010, it had begun disposal proceedings as Technicolor took on a restructuring.

Technicolor successfully sold off Grass Valley's broadcast business to Francisco Partners, in a deal valuing the broadcast business at $100 million.

Francisco Partners closed the deal at the end of 2010, with terms being primarily in the form of a promissory note "issued to Technicolor with a six-year maturity and bearing a capitalized interest of 5% per year" and Euros 20 million in cash transferred to Technicolor "for ongoing management of the activity."

The purchase of Grass Valley did not materially impact the restructuring, however, with Technicolor noting that, "given the structure of the offer, Technicolor will not receive cash proceeds from this disposal which can be applied to the company's Disposal Proceeds Notes."

So the company began selling off other assets, announcing in late 2010 that it was selling off much of its stake in Screenvision US to an investment fund, Shamrock Capital Growth Fund II. This particular deal allowed $60 million to be "applied to the Disposal Proceeds Notes issued as part of the financial restructuring closed in the first semester 2010."

Technicolor continues forward as the film and digital services to Screenvision, in which it maintains a small minority stake, and the company was also able to sell off a few other bits of Grass Valley transmission solutions, although they weren't material to the restructuring effort.

The proceeds from the Screenvision sale were enough of a catalyst for Technicolor to exit its restructuring, although only after it issued 50 million new shares at Euros 4.255 each, which it had been authorized to do at a shareholder's meeting in late 2010.

Which brings us to today's sale: A strategic investment fund in France, known as FCDE (Fonds de Consolidation et de Développement des Entreprises), is buying 100% of all of the Thomson Video Networks assets, including the Thomson name.

"The investment includes 100-percent ownership of everything considered to be part of Thomson Video Networks," Technicolor stated in a press release. "This includes the entire portfolio: video encoders/decoders, MPEG processors, video servers, datacasters, network management, monitoring and switching product lines, the associated R&D centers, and the systems activities worldwide."

In addition to the assets, the offer includes the Thomson Video Networks' global sales and customer support organizations, management and administrative support functions and the use of the Thomson brand.

"The use of the Thomson brand," Technicolor stated," which has been synonymous with expertise and innovation at the highest level and a trusted partner to the world's leading broadcasters, is also part of the offer."

What's interesting about the purchase is that the consolidated fund, FCDE, is largely funded by FSI (Fonds Stratégique d'Investissement), which means the French government will indirectly salvage the Thomson name and also indirectly enter into the streaming media and digital television broadcast markets. FSI accounts for approximately half of the FCDE's funding, with the remaining about being funded by French-headquartered banks and insurance companies.

For its part, Thomson Video Networks welcomed the investment-and the ability to stand on its own once again after a decade under the better-known Technicolor brand.

"The FCDE fully supports Thomson Video Networks in its continued global-growth strategy and sustained investment in R&D so as to ensure constant evolution and technological leadership," said Thompson Video Networks' president, Christophe Delahousse. "We will be able to develop to our full potential as an independent organization strongly committed to R&D."

The nod toward research and development is key here, as the innovation umbrella provides the best coverage for a government-funded acquisition of a private company in uncertain economic times. For its part, FCDE sees that Thomson Video Networks' growth will be more to the East and in the United States than in Europe.

"We want to help Thomson Video Networks to capitalize on its numerous innovations," said FCDE executive board member Charles-Henri Rossignol. "This investment will allow Thomson Video Networks to reinforce its presence with a renewed product line targeting the most promising market segments-satellite, terrestrial, IPTV, and Web T-and the fastest growing regions (United States, South America, and Asia)."

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