Jun 20, 2022

Animation/VFX Studio DNEG Cancels $1.7 Billion SPAC Deal

DNEG, an animation and VFX studio with offices in London, Vancouver, Mumbai, Los Angeles, Chennai, Montreal, Chandigarh, Bangalore, and Toronto, has withdrawn plans to go public through a SPAC merger.

Background Earlier this year, DNEG announced that it would go public through a merger with a special purpose acquisition company (SPAC). At the time, the company was planning to merge with NASDAQ-listed Sports Ventures Acquisition Corp. The result would have left the company name DNEG, then valued at about $1.7 billion, led by Namit Malhotra, DNEG's CEO and chairman.

What is a SPAC - A special purpose acquisition company (SPAC) is a kind of "blank check company" that has no commercial activity of its own and exists solely to raise capital through an initial public offering (IPO) to acquire or merge with an existing company. about 24 months) to make an acquisition. If the acquisition does not close, SPAC is dissolved and investors get their money back. [Last Thursday, the two companies issued a joint statement in which they cited "current unfavorable conditions and other factors in the SPAC market." Equity markets around the world have been volatile recently, adversely affecting initial public offerings. In addition, SPAC trading is rapidly losing popularity. As The New York Times reported last week, "After a hot and heavy two years in which investors poured $250 billion into SPACs, rising inflation, rising interest rates and the threat of recession are fueling doubts."

What was the result of the cancellation - according to filings with the SEC, DNEG had to pay a $1.5 million termination fee for backing out. In the long run, however, the company's future is bright. Thursday's announcement came as DNEG released a business update, announcing that it exceeded its revenue targets for the fiscal year ended March, reporting revenue of $409.3 million, net income of $39.3 million, and adjusted EBITDA of $106 million (up 33.5%, 214.7%, and 22.4% from the previous year, respectively). days later

last Wednesday, DNEG announced that Erica Burton will move to the position of co-president of DNEG Animation. (She will share the title of President of Animation with Tom Jacomb. Previously, Burton was the studio's president of VFX production.)

In May, DNEG agreed to extend its $350 million partnership with Netflix: DNEG was responsible for VFX on "Stranger Things" and "The Glass Onion: A Knives Out Mystery" and has worked on the upcoming "Nimona" and " DNEG also appears to be the favorite animation studio of up-and-coming British production company Rocksmith Animation, and has been the animation studio for "Ron's Gone Wrong" and the upcoming holiday film "That Christmas" have commissioned DNEG to produce animation.

DNEG's foray into character animation strengthens its existing work as a top VFX studio, and its recent projects include "Tenet," "Dune," "No Time To Die," and the upcoming "Bullet Train" and " Shazam," among others. Wrath of the Gods

Comments from the Companies-In the release announcing the cancellation, Malhotra stated: "Due to headwinds and general market volatility in the SPAC market, we have decided to terminate the SPAC process with Sports Ventures. Alan and the team at Sports Ventures have been great partners in this process. We are very optimistic about DNEG's future and the company continues to show excellent performance, as evidenced by the record revenue growth rates announced earlier this week. Our strong pipeline reflects the significant demand for our industry-leading visual effects and animation services, as evidenced by our recently announced multi-year contract extension with Netflix through 2025 and our VFX services renewal agreement."

Sports Ventures CEO and Chairman of the Board Alan Kestenbaum said, "Due to current SPAC and stock market conditions, we have mutually determined that the best option for all parties at this time is to close the transaction Namit and his team are are leaders in this market and have produced an excellent piece of work that won a total of awards this year, DNEG has a bright future and we wish everyone there the best of luck."