May 3, 2012 / 6:15 AM / 6 years ago

UPDATE 2-JPMorgan to boost Technicolor stake in rights issue

* Technicolor plans capital increase of up to 158 mln eur

* Technicolor aims to cut debt

* JPMorgan to end up with 25-29.96 pct of Technicolor

* Offer to take place between June 27 and July 3

By James Regan and Julien Ponthus

PARIS, May 3 (Reuters) - Technicolor said U.S. bank JPMorgan Chase planned 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 in a two-step capital hike, with the first tranche reserved for an investment vehicle jointly owned by JPMorgan’s private equity investment arm and by the bank itself.

In addition, JPMorgan has committed to buy up to three-quarters of the second issue, which will also be open to existing shareholders, 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.

Shares in Technicolor, which had been suspended ahead of the announcement, jumped as much as a fifth as they resumed trading. The stock was up 3.2 percent at 1.65 euros by 1040 GMT, giving the company a market value of around 380 million euros.

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 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 revealed on Wednesday that it had received an offer to take a minority stake from an “international institution”, without naming it.

Coming just four days before the French presidential election, in a campaign in which domestic jobs have been a key issue, this prompted Industry Minister Eric Besson to issue a statement calling on the FSI strategic investment fund to get involved.

Technicolor’s finance head, Stephane Rougeot, said, however, that the company had not asked for government intervention, nor had it been told about Besson’s interest in the case.

“We haven’t had any contact with the FSI,” Rougeot said. “We read the declaration by Besson yesterday but we haven’t had any contact.”

A source close to the FSI said the fund invests “at the request or in agreement with the management and the project of the company”.

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.

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 had closed at 1.599 euros on Monday.

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.

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