Rhythm & Hues finalizes sale to Prana Studios

A federal bankruptcy judge on Friday approved the sale of Rhythm & Hues, the Oscar-winning visual effects company that recently filed for bankruptcy protection, to an affiliate of Prana Studios, a Los Angeles animation and effects company.

The sale, valued at about $30 million, ends a closely-watched auction of one of Hollywood’s best-known visual effects companies whose financial struggles have come to symbolize the challenges faced by an industry that was pioneered in California.

Prana, which has offices in Los Angeles and a subsidiary in Mumbai, India, has done computer animation and effects work on such movies as the 2005 film “Hoodwinked!” from Weinstein Co. and the 2010 Walt Disney movie “Tron: Legacy.” It also has worked on Disney’s upcoming animated release “Planes.”

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Rhythm & Hues filed for Chapter 11 bankruptcy protection last month after laying off 250 employees. It cited several factors, including foreign film tax subsidies and a falloff in feature film work form its major clients.


One of Hollywood’s most respected effects houses, Rhythm & Hues recently won an Oscar for its work on Ang Lee’s “Life of Pi.” Its other credits include “Percy Jackson & the Sea of Monsters,” “Django Unchained,” “Fast and Furious” and “X-Men First Class.”

A subsidiary of Prana Studios called 34X118 Holdings came in with the highest offer following a two-day auction held at the Century City offices of the law firm Greenberg Glusker. It beat out several other bidders, including Prime Focus, one of India’s largest post-production companies, and an investor in China Lion, a film distribution company with an office in L.A.

“Our partnership will allow R&H; to continue the business of creating world-class digital imagery,” Jeffrey A. Okun, Prana’s senior vice president, VFX, said in a statement. “While remaining a stand-alone company focusing on cutting-edge visual effects and innovative technology, R&H; will be complimented by Prana’s world-class long-form animation.”

Allan Soong of Deloitte CRG will serve as chief restructuring officer of the new operating company. He will work with Lee Berger as president, Erika Burton as co-president and Gautham Krishnamurthy as chief technology officer to restructure the operations while maintaining the creative expertise, the statement said.

“This is a positive outcome to a difficult situation,” Berger said, “and we are thrilled to be able to put this process behind us. We are grateful for Prana’s support as well as the support of their investor group, and are excited to begin the next chapter of R&H;’s history.”

Anand Mahindra -- chairman of Mahindra Group, an investor in Prana Studios -- said: “This bold move will make them the animation/VFX leaders with global delivery capability and will substantially increase the scale and complexity of their work.”


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