Rhythm & Hues Studios is hunting for new capital, and the visual effects company will likely have to sell a minority stake to get it.R&H has enlisted independent banking firm FocalPoint Partners to help raise just south of $20 million in equity to fund the company’s international expansion. Rhythm & Hues is already talking to investors. Sources close to the talks caution that no deal is imminent; they also emphasize that R&H is not distressed and is seeking outside funding for growth opportunities. Known for pioneering offshoring of visual effects production, R&H has facilities in Vancouver, Malaysia and India and was one of the first American post companies to significantly break into China. Its further international expansion would focus on building facilities in low-cost locales, especially in Asia. Company insiders say R&H has recently had to increase the portion of work it looks to offshore from 40% to 80%. R&H’s assets include backend stakes in future films on which the company has worked, including 20th Century Fox’s “Life of Pi.” R&H no longer owns equity in any previously released pics. More and more vfx companies are providing services at cost in exchange for backend participation on films on which they work, as Rhythm & Hues has done, in hopes of sharing in the success of those projects. Company also has a slate of its own internally developed feature films that it intends to produce. With its shrinking margins and stiff global competition, the vfx industry — like many sectors of the entertainment business — can be difficult to invest in. Cash flow can be irregular, and the most valuable assets are often people, who may not be under contract. Furthermore, vfx work now flows around the globe in pursuit of tax incentives and subsidies, which can fluctuate as regimes and policies change. As a result, large vfx companies rarely change hands, and it’s difficult to put a cash value on them. Rhythm and Hues film division president Lee Berger denied that potential investors could buy the company outright. “We are not for sale,” Berger said over email. “However, we continue to raise money for our film fund, East Grand Films, and we are also speaking with potential joint venture partners regarding the company’s continued international expansion.” The overall outlook for the visual effects business in California is becoming increasingly gloomy as work flees the U.S. and major studios continue to grind vfx companies on price. FocalPoint Partners declined to comment. Company specializes in capital raising, mergers and acquisitions.