Virgin Communications Ltd. of the U.K. is considering spinning off its U.S.-based entertainment unit through an initial public offering in the U.S., chairman Robert Devereux told Dow Jones.
Virgin Communications is the holding company for Virgin Group PLC’s entertainment, publishing, production and broadcasting interests.
Capital raising limbo
Devereux said the group hasn’t decided whether the sale of 15% of Virgin Interactive Entertainment PLC, a video and entertainment software company, to Hasbro Inc. changes the need for the capital raising.
Virgin sold the stake in Virgin Interactive to Hasbro, the world’s largest toy manufacturer, earlier this month for $ 25 million.
That values all of Virgin Interactive at about $ 167 million, but Devereux said Hasbro’s participation in the company raises its value.
Last week, Mattel Inc. overtook Hasbro as the world’s largest toy company by purchasing Fisher-Price in a $ 1 billion deal. Mattel has product ties to the Walt Disney Co., Hanna-Barbera and other showbiz companies.
Devereux said it is unlikely that Virgin would sell a stake in Virgin Interactive to a financial investor, but said a public offering, or float, remains an option. He added that Virgin would keep at least 50% of the unit.
“As far as a float is concerned, it’s an option that we are considering,” he said. “At the moment, we have done a fair amount of prepatory work toward that end.”
He said the company and its advisers now have to factor the impact of the Hasbro deal into those considerations, and added it could be two to three weeks before a decision is made on the matter.
Devereux declined to comment on when a float might proceed, although one industry source said an announcement could be about two months away.
According to Devereux, Hasbro and others approached Virgin about taking a stake in Virgin Interactive, which was created in 1983 under the name of Virgin Games. The unit develops and publishes interactive entertainment games for Nintendo and Sega’s bit and hand-held game consoles, as well as for PC, Apple and Amiga computer platforms.
Industry sources estimate that Virgin Interactive’s sales grew 100% last year to about $ 100 million, and said the pace of growth is probably being maintained.
Devereux said he expects the unit’s sales to outpace the market for videogames, and Virgin Interactive is well positioned to take advantage of the rapidly increasing CD-ROM market.
He added that the link with Hasbro should provide opportunities for distribution and other cooperation. The two companies have agreed to establish a joint venture incorporated within Virgin Interactive to develop and market Hasbro’s existing product lines and other jointly selected properties.