Technicolor announced it is selling its Research & Innovation group to InterDigital.
For more information visit: www.technicolor.com ; www.interdigital.com
Unedited press release follows:
TECHNICOLOR: TECHNICOLOR HAS RECEIVED A BINDING OFFER FOR ITS RESEARCH & INNOVATION ACTIVITY FROM INTERDIGITAL
Technicolor has received a binding offer for its Research & innovation activity from interdigital
Paris (France), 11 February 2019 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) announces it has received a binding offer and entered into exclusive negotiations with InterDigital (NASDAQ : IDCC), a mobile technology research and development company, for the sale of its Research & Innovation activity. It is worth highlighting that InterDigital acquired Technicolor’s Patent Licensing business in 2018.
Frederic Rose, Chief Executive Officer of Technicolor, stated: “This proposed transaction continues the simplification of the Group’s structure while ensuring that its R&I teams join a world class technological organization. As a result, Technicolor will henceforth be able to focus its resources solely on its operating businesses.”
Deal structure and impact on Technicolor financials
The transaction would be structured as an asset purchase with a concurrent R&I cooperation agreement specifically:
• With InterDigital’s acquisition of Technicolor’s R&I activity, Technicolor will materially reduce its costs (c. (€21) million of Adjusted EBITDA on 2017 cost basis) starting in 2020, representing a payback of less than 12 months;
• Technicolor’s right to receive 42,5% (beyond operating expenses) of the future royalties from InterDigital’s licensing activities in the Consumer Electronics field would also be amended. As a result of various adjustments, Technicolor’s future cash receipts would be reduced by 50% compared to the previous net present value estimation.
R&I was presented in Corporate and Other segment but will now be classified in the Discontinued operations together with the Patent Licensing business. Corporate and Other segment includes Trademark Licensing activities and Corporate activities.
About Technicolor
Technicolor, a worldwide technology leader in the media and entertainment sector, is at the forefront of digital innovation. Our world class research and innovation laboratories enable us to lead the market in delivering advanced video services to content creators and distributors. Our commitment: supporting the delivery of exciting new experiences for consumers in theaters, homes and on-the-go.
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InterDigital Makes Binding Offer to Acquire Technicolor’s Research & Innovation Unit
World-Class R&D Team Will Launch InterDigital into Global Leadership Role in Advanced Video Technology
WILMINGTON, Del., Feb. 11, 2019 — InterDigital, Inc. (NASDAQ: IDCC), a mobile technology research and development company, today announced that it has made a binding offer to acquire the award-winning Research & Innovation (R&I) unit of Technicolor SA (Euronext Paris: TCH) (OTCQX: TCLRY), a worldwide technology leader in the media and entertainment sector. Upon completion of the transaction, InterDigital would become an unquestioned leader in both wireless and video research, with R&D-backed portfolios addressing the mobile, consumer electronics, IoT, and other markets.
In order to accommodate French labor law, InterDigital has made an irrevocable offer to Technicolor and certain of its subsidiaries to purchase Technicolor’s R&I unit. After completing the required prior consultation with Technicolor’s works council, the companies expect to execute a definitive acquisition agreement, the terms of which have been negotiated. The transaction is expected to close in mid-2019, subject to customary closing conditions.
As consideration for the acquisition, the parties have agreed to terminate the jointly-funded R&D collaboration that was entered into as part of InterDigital’s acquisition of Technicolor’s licensing business. In addition, Technicolor has agreed to reduce its rights to a revenue-sharing arrangement announced as part of InterDigital’s acquisition of Technicolor’s licensing business. There is no cash consideration.
With engineering teams in Rennes, France, and Palo Alto, California who will transfer to InterDigital, R&I is a premier research lab that conducts fundamental research into video coding, IoT / smart home, imaging sciences, AR and VR and artificial intelligence / machine learning. The unit was the driving force behind the patent portfolio acquired by InterDigital from Technicolor in July 2018. Technicolor’s R&I team includes leaders in fundamental standards like HEVC, ATSC 3.0 and other video coding technologies. Like InterDigital Labs, R&I also enjoys partnerships and collaboration with world-class universities and researchers around the world.
“Acquiring R&I is a decisive step in the creation of InterDigital’s video R&D and licensing business, which began with the acquisition of Technicolor’s licensing business last year. With this transaction, InterDigital creates an extraordinarily powerful research engine that will deliver fundamental innovation into two major markets: the wireless market, our longtime leadership area, and the video, display and consumer electronics market, a market with roughly the same revenue potential as the wireless market and which is a greenfield opportunity for us. Equally important, this transaction does not affect our commitment to diligent cost control and high operating leverage,” said William J. Merritt, President and CEO of InterDigital.
As part of the transaction, InterDigital will deliver R&D services to Technicolor. The agreement would support Technicolor’s continued leadership in immersive technology.
Financial Guidance
• The transaction will result in a modest increase in operating expenses after taking into account R&D tax credits from the French government and the elimination of InterDigital’s $5 million annual payment obligation to Technicolor to partially fund research. This obligation originated in connection with InterDigital’s July 2018 acquisition of Technicolor’s licensing business.
• A portion of the operating expenses will be paid through research contracts with Technicolor’s business units.
• InterDigital remains committed to restoring recurring costs, net of the proceeds from the above-noted research contracts, to 2017 levels.
• Unrelated to this latest transaction, InterDigital noted that it expects its fourth quarter 2018 operating expenses to be at the top end of the range communicated at our Investor Day held on December 10, 2018. We expect our fourth quarter 2018 operating expenses will include approximately $9 million related to one-time charges, including $4 million of non-cash charges related to the July 2018 acquisition of Technicolor’s licensing business.
About InterDigital®
InterDigital develops mobile technologies that are at the core of devices, networks, and services worldwide. We solve many of the industry’s most critical and complex technical challenges, inventing solutions for more efficient broadband networks and a richer multimedia experience years ahead of market deployment. InterDigital has licenses and strategic relationships with many of the world’s leading wireless companies. Founded in 1972, InterDigital is listed on NASDAQ and is included in the S&P MidCap 400® index.