Definitive Agreement Reached With Carlton Communications For The Acquisition Of Technicolor By Thomson Multimedia

Technicolor, The World Leader In Services To The Media And Content Industries, To Play A Key Role In Thomsonís Digital Media Solutions Business Carlton To Become Strategic Shareholder Of Thomson, Form Strategic Cooperation In Digital Terrestrial TV

17-Jan-01

Further to its announcement on December 11, 2000, Thomson Multimedia announced that it has reached a definitive agreement with Carlton Communications Plc to acquire Technicolor. The transaction remains subject to shareholders and regulatory approvals. In addition, the two companies will enter into a strategic cooperation in the fields of digital terrestrial television, interactive TV and media services. Acquisition Of Technicolor Technicolor is the world leader in services to the media and content industries including processing and distributing motion picture film. It is also the largest independent manufacturer and distributor of DVDs and distributor of videocassettes. Technicolor has established also a leading position in the development of digital cinema in the U.S. through the formation of a joint venture with QUALCOMMÆ. Leader in digital lab services, Technicolor is developing digital rights management services to and with its clients. Headquartered in Camarillo, California, Technicolorís operations are global in scale, spanning nine countries with twenty major operating units in North America, Europe and Australia. For the fiscal year ended September 30, 2000, Technicolor posted $1.6 billion in revenues, EBITDA (Earnings Before Interest, Taxes, Depreciation and amortization) of $374 million and operating profit of $247 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. Thomson sees substantial growth opportunities with Technicolorís strong current and future client base, in particular in DVDs, digital cinema, digital lab, digital media chain services and future broadband online services. With the proposed acquisition of Technicolor, Thomson further strengthens its Digital Media Solutions division, which will be also enhanced by other partnerships and other technology acquisitions. Customers And Partners Welcome The Technicolor Acquisition Warren Lieberfarb, President of Warner Home Video said, ""Warner Home Video is very pleased that Thomson Multimedia has entered into an agreement to purchase Technicolor. As a leading provider of home entertainment, Warner Home Video has a long and valuable relationship with Technicolor. The transition from analog to digital technology underway in the entertainment industry will provide multiple new revenue opportunities. However, this transition must be closely managed to protect and enhance our revenue stream. As an innovative technology company, Thomson, through its acquisition of Technicolor, will have a great opportunity to play a key role in this transition."" Ron Nelson, Chief Operating Officer of DreamWorks said, ""Technicolor has been an important and critical supply partner to DreamWorks since our startup. We appreciate the strength that a Technicolor merger into Thomson Multimedia brings, and believe the combination should give Thomson an important strategic position in the migration to a digital media path between content and consumer."" Terms Of The Transaction The preliminary agreement announced December 11, 2000 was subject to conditions including signing of a definitive agreement and satisfactory completion of due diligence. These conditions have now being satisfied. In line with the preliminary agreement, the terms and conditions of the definitive agreement are as follows: - Carlton to become a strategic shareholder of Thomson. Thomson will issue to Carlton 15.5 million non-transferable, non-interest bearing bonds redeemable in shares mandatorily converted in 15.5 million ordinary shares one year after the closing, representing approximately 5.5 percent of the outstanding shares of Thomson. On completion of the transaction, Michael Green, Chairman of Carlton, will be proposed to Thomsonís shareholders as a Board member. - Digital media solutions development. Carlton will transfer to Thomson 100 percent of the share capital of Technicolor. In addition, in order to leverage Technicolorís leadership in digital cinema, Carlton and Thomson have agreed to form a 50/50 joint venture, under which Carlton and Technicolor will jointly develop their in-theatre screen advertising business in the U.S. - Interactive TV collaboration. Carlton will invest up to $15 million in TAK, Thomsonís European interactive TV joint venture with Microsoft. - Additional consideration. In addition to the above, Thomson will pay to Carlton $750 million at closing, and an aggregate amount of $600 million payable over the next four years in four equal installments plus interest, on the first, second, third and fourth anniversaries of the closing. Thomson may elect to pay up to half of the deferred consideration in Thomson shares. The acquisition of Technicolor will allow Thomson to achieve estimated pre-tax cost synergies of $25 to 50 million by 2003, mainly related to IP royalties, sourcing, manufacturing and supply chain management. The transaction will be very significantly accretive to cash and reporting net earnings to Thomson shareholders as early as 2001. This agreement is subject to approval from Thomson and Carltonís respective shareholders and regulatory authorities, including the French Commission des Participations et Transferts and U.S. and European regulatory bodies. It is expected that the transaction will be completed by March 2001. ""We are extremely pleased to have achieved this significant step toward the completion of the acquisition of Technicolor and, after regulatory approvals, to welcome Technicolor as a new member of the Thomson community,"" said Thierry Breton, Chairman and Chief Executive Officer of Thomson Multimedia. ""The acquisition of Technicolor will not only enable Thomson to grow its cash flow and EPS, but also to strengthen its position as a leading service provider to the media and content industries. With this strategic move our group intends to play a pivotal role as a catalyst in the transformation of the home entertainment and consumer electronics industry, supporting a growing number of customers and consumers to enter into the digital age at their own pace. Furthermore, I also firmly believe that with this new strategic cooperation, Thomson is poised to become the leader in digital terrestrial products and solutions and replicate the success it has in digital satellite television,"" Breton continued.

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