PARIS Technicolor said U.S. bank JPMorgan Chase plans to take a stake of up to 29.96 percent in the French digital video specialist to help it cut debt and push through its turnaround plan.
The transaction will take place through a two-step capital increase, the first tranche reserved for JPMorgan and the second also open to existing shareholders.
An investment vehicle jointly owned by JPMorgan's private equity investment arm and by the bank itself has committed to buy up to three-quarters of the second issue, Technicolor said.
The French company expects to raise between 147 million and 158 million euros ($208 million) from the capital hike and will use 80 percent of net proceeds to pay down debt, it said in a statement on Thursday.
"The capital increase we are planning will provide the company with a stronger financial structure and a stable shareholder base to implement its growth strategy," Technicolor Chief Executive Frederic Rose said.
Technicolor suffers from a high cost structure and net debt, which reached 1.13 billion euros last year, while its loss-making set-top box business has been hit by telecom operators' moves to shift production to cheaper countries such as China and Tunisia and the impact of the euro zone debt crisis on prices.
After cutting 6,000 jobs last year, Technicolor has said it aims to reduce debt by 200-300 million euros and generate 400 million in free cash flow over 2012-15.
Technicolor plans initially to issue 72.28 million shares at 1.60 euros a share in a reserved capital increase for JPMorgan. It will subsequently offer 26.91 million shares to existing shareholders at 1.56 euros each.
The stock, which was suspended on Wednesday, last traded at 1.599 euros.
JPMorgan, which already holds 1 percent of Technicolor, will own between 25 percent and 29.96 percent of the group following the rights issue. It will also have two seats on the board of the French company.
The offer is expected to run from June 27 until July 3.
Last month, CEO Rose told Reuters Technicolor hoped to find a partner for the set-top box business this year and was in talks with several parties.
($1 = 0.7603 euros)
(Reporting by James Regan; Editing by Nina Sovich and Christian Plumb)