Francisco Partners Makes Bid for 100% Stake in Grass Valley

Technicolor appears to have found a buyer for the Grass Valley business unit. Francisco Partners, a San Francisco-based private-equity firm focused on investments in technology-based companies, has made a binding offer to Technicolor that will keep the Grass Valley name in place. The deal is expected to close by the end of 2010, subject to final agreement and regulatory approval.

“This is clearly important,” says SVP Jeff Rosica, head of the Grass Valley Broadcast & Professional business, “not only for our customers but also for our employees, to make sure they know where we are heading in the future.”

The Grass Valley broadcast unit has 1,457 employees (as of June 30) in 23 countries and recorded revenues of about 272 million euros in 2009 and an operating loss of about 52 million euros. It also consumed about 49 million euros in cash (excluding changes in working capital) and, in 2009, accounted for 72% of the total Grass Valley perimeter revenues and 59% of the operating loss.

The scope of the offer covers all assets and employees of the business as well as the transfer of patents and a license agreement related to the professional-broadcast field of use. Retirement liabilities related to the active employees included in the sale will also be transferred to Francisco Partners.

The offer values the broadcast business at $100 million and comprises an $80 million promissory note issued to Technicolor with a six-year maturity and bearing a capitalized interest of 5% per year. The amount of the note is the value of the business minus the present value of retirement liabilities transferred.

In addition, Technicolor will transfer a net amount of 20 million euros in cash required for the ongoing management of Grass Valley. Technicolor may also receive additional consideration based on the potential future remuneration of Francisco Partners.

With nearly $5 billion of capital under management, Francisco Partners is one of the world’s largest technology-focused private-equity funds. The firm was founded to pursue structured investments in technology and technology-based companies with a strong foundation and secure market position. The firm targets investments in private companies, with transaction values ranging from $30 million to $2 billion. Since its inception, Francisco Partners has invested more than $4 billion of equity capital in more than 50 technology companies.

“We are excited about this opportunity, as Grass Valley’s market leadership is clearly evident,” says David Golob, partner at Francisco Partners. “The business has an unrivaled brand identity and company heritage, a long history of innovation, team members that are dedicated to their customers’ success, and an impressive product portfolio. We are looking forward to the opportunity to work closely with Grass Valley’s management to create a company that leverages the strong entrepreneurial spirit within Grass Valley, allowing them to achieve even greater success.”

The binding offer from Francisco Partners is for 100% ownership of the current Grass Valley Broadcast & Professional business, which would operate as “Grass Valley” going forward. This comprises the camera, content-repurposing, editing, master-control, modular, news-production, production-automation, routing, servers, storage, and switching product lines, their entire product portfolios, the R&D centers and factories around the world, the Sales & Systems activities and Customer Support organization worldwide, and the management and administrative-support functions dedicated to the business. The business and associated product lines for which the offer was made represent the core of what the market has historically known as Grass Valley products.

The deal culminates a long sale process that began prior to the economic downturn in 2008. Rosica says Grass Valley is a good match for Francisco Partners and its portfolio, whose focus is clearly on technology companies.

“This is positive news for the company and our customers,” he adds. “The opportunity to be part of Francisco Partners’ portfolio gives Grass Valley a solid foundation to continue to work tirelessly to maintain our core values of innovation, performance, and passion that have benefitted our customers throughout the years. Our customers worldwide will continue to receive the high quality and service that they have come to expect from Grass Valley, with continued focus on raising the bar in our industry.”

The Transmission and Headend businesses, which are in the process of being separated from the Grass Valley Broadcast & Professional business, are not included in the offer received. Technicolor will continue the planned divestiture of these businesses separately. These businesses plan to operate individually going forward.

Subject to final agreement, regulatory approval, and applicable notification requirements and, when it is requested, the prior consultation of staff representatives, the transaction is expected to be completed before the end of the year.

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