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Technicolor tables plan B for AGM


Published: 1 June, 2012


We're not yet sure whether Vector Group has the power to get a proxy fight going over two very different ways to fund Technicolor going forwards, but the board this week voted in favor of the JP Morgan based deal to acquire up to 29% of the company for what appears to be a pittance and voted down the alternative proposal. But it will still put the two plans up for discussion at its next shareholder meeting.

The original JP Morgan "Jesper Cooperatief" deal was announced on May 2nd and it was enough of a surprise to halt trading in the Technicolor stock for a day. It is designed as a two phase move, first a share placement, followed by a rights issue, but with the right issue at a premium due to the placement, and underwritten by the same company.

This immediately drew an unsolicited proposal from Vector - it wants to offer some €186 million in return for issuing another 109,114,822 shares. The deal the board prefers is the one it came up with to take on €158 million and give its share price a kick upwards. That money will pay back some debt and realign some other debts.

Deals like this have a way of coming back to bite the board. The second deal would bring in more money and a lot of investors, given a chance to vote on this, might prefer that one, depending on the level of dilution. The Board wants to be associated with JP Morgan Chase & Co, and thinks this will have an effect on doing business - investors may not agree. The JP Morgan deal is at €1.59 a share while the Vector deal is at €1.70 per share, making it more attractive at any investor vote - which is exactly why it has been proposed. Fundamentally these offers are often made to sabotage what are seen as weaker deals.

Technicolor has now proposed that it be discussed at the June 20 General Shareholders' Meeting and if its original plan does not get voted through, it may propose this one instead.

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