British Concern Agrees to Buy Technicolor Inc. : Carlton to Pay About $780 Million for the Movie-Film Processor

A British firm, Carlton Communications, took a giant leap into movie-film processing by agreeing Friday to pay about $780 million for the world leader, Los Angeles-based Technicolor Holdings Inc.

Financier Ronald O. Perelman, who has a reputation as a corporate raider and whose holdings include Revlon Group, is on the selling side of the deal. Perelman controls Technicolor, a private company, through its parent, MacAndrews & Forbes, which bought it about six years ago from public shareholders for $105 million.

Carlton, which bills as itself the largest independent supplier of television services in Britain, said it will finance most of the purchase price by selling $618 million of new stock and $200 million of notes to the public.

Longtime Leader

The deal must be approved by Carlton’s shareholders at a meeting scheduled for Oct. 3. If approved, the sale would be completed shortly afterward, the company said.

Technicolor, which was founded in 1915 and pioneered the development of color film technology, has never yielded leadership in the field to newer competitors. Among its major customers for film processing are Warner Bros., Paramount and Tri-Star.

In the burgeoning field of videocassette duplication, Technicolor also is a leader, with exclusive contracts with Warner, Walt Disney Co., Lorimar Telepictures, HBO and CBS/Fox.

Noting the rapid growth in European markets for the products of major U.S. film studios, Carlton said it believes that maintaining a major presence on both sides of the Atlantic will maximize its business opportunities.

The company said its acquisition represents “a unique opportunity for Carlton to establish itself as the largest provider of services to the growing television and film market in the U.S.A. and in Europe.”

Perelman, who completed his acquisition of Technicolor in January, 1983, reversed field and started getting out of the entertainment industry about nine months ago. That’s when he started selling off the assets of Burbank-based Compact Video.

“He was infatuated by the entertainment business (when) he got into Technicolor,” notes Kent Baum, an analyst in the San Francisco office of the Baltimore securities firm Alex. Brown & Sons.

Observers have been watching since last spring for some major new acquisition move by the Perelman forces but no moves have surfaced publicly. Companies that have figured in the rumor mill as potential Perelman targets have included two industrial giants, American Cyanamid and Kimberly-Clark.

Perelman’s Technicolor bought a major Hollywood competitor, Metrocolor, from Lorimar two years ago, but the U.S. Justice Department filed an antitrust suit, which resulted in cancellation of the deal.

Carlton said Technicolor’s proficiency in film processing was illustrated by the fact that the simultaneous summer releases of two big films, “Crocodile Dundee II” and “Rambo III,” required the company to duplicate and deliver more than 4,500 prints in seven days at its North Hollywood plant.

Technicolor entered the videocassette duplication business in 1981. In 1987, it expanded its operations beyond its Newberry Park plant by opening a new high-speed duplication facility in Livonia, Mich. In recent months, it acquired the CBS/Fox and TapeTech duplication plants in London.

Carlton got into the video duplication business last March, when it bought Philadelphia-based Modern Video for about $83 million.

Friday’s announcement said Technicolor posted operating profits of $46.9 million last year on $288.9 million in sales. Carlton credited the effects of Technicolor’s new video duplication customers in late 1987 for an increase in operating profits to $33.9 million on $184.6 million in sales for the first six months of 1988, compared to $19.3 million in operating profits on $128.1 million in sales a year earlier.

Carlton said its own operating profits rose 59% to about $36 million in the first six months of fiscal 1988 and estimated its pretax profit to be at least $81.6 million for the year ending Sept. 30.