Thomson multimedia To Form Strategic Alliance With Carlton Communications In Digital Terrestrial, Interactive Television And Media Services

Carlton To Acquire 5.5 Percent Of Thomson Multimedia And Invest In TAK, Thomsonís Interactive Television Subsidiary Thomson To Acquire Technicolor, A Leading Worldwide Media Service Provider In Film, Video, CDs And DVDs

12-Dec-00

Thomson multimedia announced that it has reached a preliminary agreement with Carlton Communications plc to form a strategic partnership. Under the terms of a legally non-binding letter of intent, the two companies intend to cooperate in the fields of digital terrestrial television, interactive TV and media services, and to restructure some of their assets accordingly. After having successfully contributed to launch digital satellite television in the mid 1990ís, Thomson intends to position itself as a leader in digital terrestrial television technologies and products in Europe and in the rest of the world. Already the worldwide leader in digital products, in particular through its relationships with operators like DIRECTVÆ in the United States and Latin America, and Canal Plus and TPS in Europe, Thomson wishes to leverage the additional expertise of Carlton, a leader in the launch of digital terrestrial in the U.K. In the field of interactive television, Thomson believes that Carlton shares its vision of the importance of interactivity on television and other consumer devices, which is expected to reshape the television experience of millions of consumers around the world, and presents significant opportunities for both content and technology companies. Finally, with respect to media services, Thomson has recently announced the creation of Digital Media Solutions, one of its five divisions, in order to provide the broadcast and content industries with systems and solutions to manage the transition from analog to digital media. In this context, Thomson announced last week the acquisition of the Philips broadcast businesses in order to achieve critical mass in solutions and services to the broadcast industry. Thomson sees Digital Media Solutions as a significant area of opportunity in the analog to digital transition. The strategic partnership between Thomson and Carlton is proposed to take the form of several inter-related transactions, including: - Carlton as a strategic partner of Thomson - Thomson would issue to Carlton 15.5 million non-interest bearing bonds redeemable in shares which would convert to 15.5 million ordinary shares on the first anniversary of the closing, representing approximately 5.5 percent of the outstanding shares of Thomson. As a strategic shareholder Carlton would be entitled to one board member. - Digital Media Solutions acquisition - Carlton would transfer to Thomson 100 percent of the share capital of Technicolor, a world leader in media services to the content industries. - Interactive TV collaboration - Carlton would invest approximately $15 million in TAK, Thomsonís European interactive TV joint venture with Microsoft. - Cash consideration - In addition to the above, Thomson would pay to Carlton $750 million at closing, and the net present value of $600 million in aggregate over the next four years in four equal installments on the first, second, third and fourth anniversaries of the closing. In Technicolor, Thomson would acquire the world leader in services to the media and content industries. Technicolor is a world leader in processor and distributor of motion picture film, as well as the largest independent manufacturer and distributor of pre-recorded DVDs, CDs and videocassettes. Technicolor is also a leader in digital lab services, has introduced digital rights management services to its client base and formed a joint venture with Qualcomm in digital cinema. Thomson sees substantial growth opportunities with Technicolorís current and future client base, in particular in DVDís, digital cinema, digital lab and digital media chain services. With the proposed acquisition of Technicolor, Thomson further strengthens its Digital Media Solutions, which will be further enhanced with other partnerships and technology acquisitions For the fiscal year ending September 30, 2000, Technicolor posted $1.6 billion in revenues, EBITDA of $378 million and operating profit of $249 million. Technicolor will continue to be managed by its existing management team lead by Lanny Raimondo, who will become a member of Thomsonís Executive Committee. The contemplated acquisition of Technicolor is expected to be materially accretive to reported net earnings for Thomson shareholders. Technicolorí free cash flow would be used for further strategic moves within the Digital Media Solutions business. Post closing of the contemplated Technicolor acquisition, Thomson will still have cash resources of approximately 1 billion euros to support its strategic development across all of its divisions to accelerate the transition of its businesses from the analog to the digital world. Further details of the strategic partnership and underlying transactions would be announced at the time of signing of the definitive agreements. This transaction is subject to satisfactory conclusion of due diligence, finalization of definitive agreements, board and shareholder approvals of Thomson and Carlton, and all necessary governmental and regulatory consents. ""We would be extremely pleased to welcome Carlton as a fifth strategic partner of Thomson"" said Thierry Breton, Chairman and Chief Executive Officer of Thomson multimedia. ""I firmly believe that Thomson is poised to become the leader in digital terrestrial products and solutions, and replicate the success it has in digital satellite television.""""The contemplated acquisition of Technicolor would not only enable Thomson to grow its cash flow, but also to strengthen its position as a leading service provider to the media and content industries in the analog to digital transition through its Digital Media Solutions division."" Breton continued. For more information about Thomson Multimedia, visit www.thomson-multimedia.com.

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