Technicolor to Acquire Canadian Firm

Technicolor, one of the oldest names in the movie industry, said Monday it has offered to buy Canadian film services company Covitec Group Inc. for $40 million in cash.

Technicolor, the Camarillo-based unit of British media powerhouse Carlton Communications, also said it plans to build a $30-million film laboratory, probably somewhere in Quebec, to complement Montreal-based Covitec’s existing facilities, which would result in the largest film lab of its kind in the world.

Technicolor is offering 59 cents a share for all the outstanding common shares of Covitec. The Canadian company’s stock was unchanged at 58 cents on the Toronto Stock Exchange.

American depositary receipts of Carlton fell $2 to close at $38.75 on Nasdaq.

Covitec, a supplier of technical services for the film, television and advertising industries in Canada, whose big-name clients include Walt Disney Co. and Time Warner Inc., has agreed to support the takeover bid, the company said in a release.

When the deal is completed, Technicolor, which processes film print and also manufactures videos and DVDs, will acquire control of Covitec’s film laboratory, post-production and production support operations in Montreal, Ottawa and Quebec City. Those operations employ more than 370 people. In addition, there is a 900,000 breakup fee payable to Technicolor if the deal falls through.

Astral Media Inc. said it has signed a lockup agreement with Technicolor to tender its 63.15% stake in Covitec. Astral will gain $24 million from the sale.

Earlier this year, Technicolor extended its foray into the Canadian market when it bought AstralTech, Canada’s second-largest videocassette duplicator, for $17.5 million from parent Astral Media.

“Technicolor is committed to continuing to expand the depth and breadth of its leading global service offerings and this acquisition does just that,” Walter Schonfeld, president of Technicolor’s Worldwide Film Group, said in a statement. “The combination with Covitec creates significant new market opportunities and enables Technicolor to provide even better service to more customers in the North American market.”

Covitec will keep its name and operate as a separate business unit of Technicolor after the acquisition.