Vector Capital and the funds under its control, which hold 0.6% of Technicolor´s shares, have requested that draft resolutions be added to the agenda of the combined general shareholders´ meeting of Technicolor on June 20, 2012, for the launch of a capital increase of up to €186 million. This proposal represents a substantial improvement to the transaction with JPMorgan and One Equity Partners announced on May 3, 2012 ("JPMorgan Transaction"). This capital increase would be used to strengthen Technicolor´s balance sheet, pay down debt and support its "˜Amplify 2015´ strategy.
Vector Capital, a $2 billion technology investment firm, is offering to bring its expertise in technology, digital media, operational improvement, and credit refinancing to enable Technicolor to better execute on its publically stated strategy.
Alex Slusky, Managing Partner and Chief Investment Officer of Vector Capital said: "Technicolor is in a state of transformation and would greatly benefit from a dedicated and experienced technology investor that would enable it to achieve its strategic objectives outlined in the "˜Amplify 2015´ roadmap, in addition to improving the stability of its balance sheet. Vector Capital will be a committed partner in helping Technicolor execute its strategy. With our experience in technology and digital media, we will help the company to emerge intact, stronger and much better positioned in the global technology marketplace."
Under the draft proposed resolutions, Vector Capital requests that Technicolor´s shareholders approve a share capital increase of up to €186.4 million for Technicolor in a two-step transaction:
a) A capital increase reserved to Petalite Investments ("Petalite"), an investment vehicle owned by the Vector funds, for an aggregate amount of €90,195,861 (including issuance premium), through the issuance of 47,471,506 new shares, at a subscription price of €1.90 per share, representing a premium of 18.75% per share compared to the reserved capital increase portion of the JPMorgan Transaction. Following this share capital increase, Vector Capital (with Petalite) would own 18% of Technicolor´s shares (taking into account its current shareholding);
b) a capital increase with preferential subscription rights to the shareholders of Technicolor of a maximum size of 18.5%, for an aggregate amount of €96,163,572 (including issuance premium) through the issuance of 61,643,316 new shares, at a subscription price of €1.56 per share. 75% of the rights issue will be guaranteed by Petalite to ensure its success.
The proceeds to Technicolor of these capital increases would represent a minimum of €162.3 million and a maximum of €186.4 million, representing incremental proceeds of up to €28.7 million as compared to the JPMorgan Transaction. At the close of these transactions, Vector Capital (with Petalite) would hold a stake representing between 18% and 29.9% of Technicolor´s shares, depending on the shareholder subscription rate to the rights issue. In order to allow Vector Capital to support Technicolor´s strategy and in light of the significant investment offered by it, the draft proposed resolutions also request from the shareholders´ meeting the appointment of each of Mr. Alexander R. Slusky (Managing Partner of Vector Capital) and Mr. David L. Fishman (Partner of Vector Capital) as members of the board of directors of Technicolor, subject to the completion of the reserved capital increase.
To secure the completion of this investment, Vector Capital has also submitted a binding, irrevocable and friendly offer to Technicolor and its shareholders containing its undertakings to subscribe to the reserved capital increase and the capital increase with preferential subscription rights.
In its offer, Vector Capital has also committed (with usual exceptions) (i) not to reach 30% or more of the share capital of Technicolor for one year from the settlement date of the reserved capital increase, (ii) to retain its Technicolor shares for at least one year from the settlement date of the reserved capital increase, (iii) to support draft resolutions recommended by the board for a period of 24 months as from the settlement date of the reserved capital increase, and (iv) not to facilitate or support any third party tender offer not recommended by the board of directors for 30 months from the settlement date of the reserved capital increase.
Vector Capital has requested that Technicolor make available to the shareholders the content of this binding offer.
This offer is subject to the approval of the shareholders´ meeting of Technicolor, the delivery by the Autorité des marchés financiers of its visa on the French language prospectus of Technicolor and usual regulatory clearances.
The offer may be accepted by Technicolor until the 15th business day after the shareholders´ meeting (and in any case no later than September 1, 2012 in case of any postponement of the shareholders´ meeting).
Lazard is acting as financial advisor to Vector Capital and Petalite.
About Vector Capital
Vector Capital is a leading global private equity firm located in San Francisco specializing in the technology sector. Founded in 1997, Vector Capital manages over $2 billion in equity capital from a variety of investors, including the world´s most respected university endowments, foundations, financial institutions, and family offices. Vector Capital has a highly focused investment strategy that emphasizes technology companies with a high degree of intellectual property that are in a state of transformation. Since inception, Vector Capital has made more than 35 investments in public and private companies with an aggregate value of more than $2.5 billion, across sectors including digital media, infrastructure software, and internet services.
