Technicolor has virtually given away the US Grass Valley broadcasting and transmission unit, taking a promissory note for $80 million, and the chance that this might rise as high as $100 million.
Technicolor is even laying out €20 million (yes Euros) in cash in order to pay for the ongoing management of the unit. The business is going to private equity group Francisco Partners and is almost the conclusion of the disposals that Technicolor said would fix its ills when it highlighted the businesses which it put up for sale in February 2009.
It said that it would sell off Grass Valley and PRN, the digital signage business which handles advertising in Wal-Mart stores, which is still to be sold off. Between them these businesses accounted for €1 billion ($1.27 billion) of sales in 2008.
At the time Technicolor was bandying around highly improbable figures for the sale of these units, and has been reporting them as discontinued operations since early 2009. The move came as soon as a new CEO Frederic Rose came from Alcatel and took over from Frank Dangeard.
Technicolor, operating then as Thomson, bought the US based Grass Valley operation for a mere $172 million back in 2001. Last year alone Grass Valley recorded revenues of about €272 million with an operating loss of around €52 million, and consumed about €49 million in cash.
It still has 1,457 employees after large cuts last year, and operates in 23 countries and sells HD digital studio cameras, field camcorders, visual processing equipment, broadcast media servers, routing switchers, mixers, automated production systems, and postproduction/editing systems, not to mention transmitters and video encoders.
Last year Technicolor took a €278 million impairment relating to Grass Valley, and will take another in its next set of figures. The entire business has now shrunk to €3,529 million (just over $4.5 billion) whereas once it had been an $11 billion business.
But in broadcast Grass Valley has hit a wall, at a time when many broadcast businesses are under threat with impoverished advertising revenues, especially during 2009, and weaker viewing figures as pay TV strengthens. Existing US competitors include Avid, Harris, Panasonic and Sony and other competitors in the broadband and network market including Harmonic, Tandberg (now part of Ericsson), Cisco and Motorola.
The transaction is expected to close before the end of 2010, subject to the relevant customary regulatory administrative approvals and consultations.