Market Watch

Grass Valley Finds a Buyer



US based private equity firm Francisco Partners has made a binding offer to Technicolor for the purchase of Grass Valley's Broadcast business for $100 million while Technicolor seeks another buyer for its head end and transmission businesses which have been divested from Grass Valley.  The deal sees Francisco Partners take ownership of all staff, current customer contracts and support obligations, R&D and manufacturing facilities as well as the complete broadcast product portfolio which includes: cameras, editing systems, production switchers, production automation systems, news production systems, video servers, storage products, content repurposing products, routers and master control switchers.

The deal is expected to complete in Q4 2010 with Grass Valley operating independently in a Francisco Partners' investment portfolio.

Analysis
Grass Valley has been for sale since early 2009. The $100 million price tag reflects the financial difficulty of the firm. Grass Valley, including its transmission and head end businesses, have suffered a 31% decrease in revenues from 2008 to 2009 translating into €87m in losses. This difficulty was partly due to the industry wide contraction in the same period which saw the sector decline by 9.5%.

The area of Grass Valley acquired by Francisco Partners had reveunues of €272m, but suffered €52m of losses in 2009 and makes up just under 75 percent of all Grass Valley activities. The head end and transmission business of Grass Valley that are to be sold seperately have traditionally been different businesses with their roots in Thomson and not Grass Valley.

The outlook of Grass Valley is improved now that a buyer has been found and their future looks more certain.  Despite heavy losses, Grass Valley still maintains a significant share of the switchers and camera markets. Success will depend on Francisco Partners' ability to reduce losses. Grass Valley has already embarked on deep rationalisation measures having made redundant 625 employees, a quarter of the workforce.  It is likely further rationalisation will be needed, but this may be politically difficult in France and Germany where Grass Valley have significant operations.

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