It’s been a tense month-and-a-half for troubled VFX studio Rhythm & Hues. After filing for Chapter 11 in February, bringing global scrutiny to the tough economics of the US VFX industry, a federal bankruptcy judge today approved the company’s sale to an affiliate of India-based Prana Studios, 34×118 Holdings Inc. The new buyer won a drawn out auction for the Oscar-winning Life Of Pi company late last night with a winning bid valued at about $17 million. Prime Focus and Chinese company Brave Vision, represented by China Lion President and co-founder Jiang Yanmin, were also in the running, with Brave Vision tentatively approved today as backup bidder, pending documents to be provided to the court before final sale. (Other outlets misreported China Lion as a bidding company yesterday, but it was not involved.)
Today in court Judge Neil Bason also addressed the unusual situation of JS Communications. Approved as stalking horse bidder on the strength of a non-binding letter of intent three weeks ago, the Korean media company dropped its bid on March 19. They may have been after an impractical deal, asking Fox and Universal to guarantee $60M worth of effects work annually for three years for Rhythm & Hues. Nevertheless, JS Communications claimed it was still owed the court-approved $425,000 break-up fee promised if they were outbid at auction. Bason today postponed a decision on that until April 22. You can read the full release below:
LOS ANGELES (March 29, 2013) – Academy Award®-winning visual effects and animation studio Rhythm & Hues was acquired out of bankruptcy today by a wholly-owned affiliate of Los Angeles-based Prana Studios, Inc. At a hearing held today in U.S. Bankruptcy Court in Los Angeles, Judge Neil Bason approved Prana Studios affiliate, 34×118 Holdings Inc., as the winning bidder after a two-day auction. Prana Studios Inc. is a U.S. animation and visual effects studio with offices in Los Angeles and Mumbai, India.
“Our partnership will allow R&H to continue the business of creating world-class digital imagery,” said Jeffrey A. Okun, Senior Vice-President, VFX, Prana Studios. “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. Our complimentary talents and relationships will create a new, best-in-class one-stop boutique provider of digital imagery to clients globally. With the additional support of our strong investor group, we are confident R&H will continue to be the innovative quality leader in our field that they’ve been for 30 years.”
The company’s assets were acquired from the court by 34×118 Holdings Inc., a Prana Studios affiliate. 34×118 Holdings Inc.is the new operating company. Allan Soong of Deliotte CRG, will serve as Chief Restructuring Officer of the new operating company, and will work with Lee Berger as President, Erika Burton as Co-President, and Gautham Krishnamurthy as CTO to restructure the operations while maintaining the creative expertise which comprises the heart and soul of the R&H brand.
“This is a positive outcome to a difficult situation,” said Lee Berger, “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, Mahindra Group said “We are delighted to have been early-stage investors in Prana Studios. 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.”
Founder of Sherpalo Ventures and Google Board member Ram Shriram said, “I am excited for Prana – the best at full service digital animation, and now digital VFX. This new arrangement allows for a single stop, stable long term solution for all the digital creative needs of the studios.”
Co-founder of Nexus Venture Partners Naren Gupta stated, “Prana’s focus on high-quality animation and VFX is a cost-effective business model that has made us a favorite partner of leading studios around the world. Acquisition of Rhythm & Hues will allow us to offer an even broader platform to our partners. Prana and its founders are continuing to innovate the way high-quality creative activities should be performed. I remain a huge fan of Prana and its management team.”
Peter M. Gilhuly of Latham & Watkins’, Andrew Walter of Evolution Media Capital, and PJ Shapiro of Ziffren, Brittenham and Branca represented Prana Studios Inc. in the negotiations. Brian L. Davidoff of Greenberg Glusker represented Rhythm & Hues.
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Ross Lincoln contributed to this report.