UPDATED: PE Firm Makes $100 Million Binding Offer for Grass Valley

NEVADA CITY, CALIF.: A San Francisco private-equity firm has made a $100 million binding offer for Technicolor’s Grass Valley business. Francisco Partners made the offer to take Grass Valley from Technicolor--formerly Thomson, which put the division up for sale 18 months ago.

The transaction includes all assets of Grass Valley Broadcast & Professional, which will operate as “Grass Valley” going forward. The transmission and headend businesses are not included in the deal. Technicolor said it will continue the previously planned divestiture of those units separately.

The transaction involves an $80 million promissory note issued to Technicolor, with a six-year maturity bearing 5 percent interest. The amount represents the value of the business less the present value of transferred retirement liabilities. Technicolor in turn will contribute €20 million (US$25.9 million) cash for ongoing operations, and maintain the right to receive “additional consideration” based on a potential future sale.

The broadcast business had 1,457 employees operating in 23 countries as of June 30, 2010, Technicolor said. It recorded revenues in 2009 of €272 million (US$352 million), an operating loss of €52 million (US$67.3 million), and consumed around €49 million ($63.4 million). (Exchange rates current.) The broadcast unit accounted for 72 percent of the total revenues of the entire Grass division--including headend and transmission--and accounted for 59 percent of the operating loss.

Francisco Partners has around $5 billion invested in various technology companies and ventures. Most are hardware and systems, software, service and semiconductor related. Transaction values are said to range from “$30 million to $2 billion.”

The Grass Valley purchase puts Francisco squarely into professional broadcast equipment. Grass product lines include cameras, content repurposing, editing, master control, modules, news production, automation, routing, servers, storage, and switching product lines. The deal also includes Grass Valley’s research-and-development centers and factories; sales and systems activities, customer support, management and administration operations.

“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,” said David Golob, partner at Francisco Partners.

Jeff Rosica, senior vice president and head of Grass Valley Broadcast & Professional said, “The opportunity to be part of Francisco Partner’s portfolio gives Grass Valley a solid foundation to continue to work tirelessly to maintain our core values of innovation, performance, and passion that have benefited our customers throughout the years.”

Grass Valley was established 50 years ago in the eponymous Sierra Nevada community by Dr. Donald Hare. The company’s Marauder-shifted video switchers came to define the industry standard. Grass, known locally as “The Group,” would become the largest employer in Nevada County, with a workforce exceeding 1,200 at one time.

Grass was merged with Tektronix in 1974. Tek unspooled it for $46 million and a 10 percent stake in 1999, to private San Diego, Calif., investor, Terry Gooding. Thomson SA purchased the company in 2002 for $172 million. As the company changed hands, its brain trust dispersed and spawned new start-ups in the area. Consequently, Nevada County is home to Nvision, Telestream, Editware, Sierra Video Systems, Ensemble Designs, AJA Video, ISIS and the old Graham-Patten Systems.

Grass Valley--the business--was most recently put up for sale in February of 2009 when Paris-based Thomson announced it would likely breach its loan covenants. Thomson subsequently underwent restructuring, emerging at Technicolor earlier this year. Having failed to attract a buyer for Grass Valley as of March, Technicolor announced in April it would cut one-fourth of the work force--625 jobs worldwide.

Around 300 employees still work at the Nevada City campus, with a few more expected to be relocated from Florida, according to The Union.

The transaction is expected to close by the end of 2010 subject to final agreement, regulatory approval, applicable notification requirements and, when requested, prior consultation of staff representatives.
-- Deborah D. McAdams