Updated 8:58 p.m. PDT
Bankrupt visual effects studio Rhythm & Hues announced this evening that Korean firm JS Communications, which had been the “stalking horse” bidder in the bankruptcy process, has missed its deadline to complete a binding Asset Sale and Purchase Agreement (APA). Thus JS is out as stalking horse bidder.
JS managing partner David Shim told Variety “I worked hard with the studios (Universal and Fox) to establish some sort of an order in the working relationship. I think it’s a problem inherent in this industry, and the type of cooperation I was seeking wasn’t working out.” He said he would miss today’s deadline because there wasn’t time to execute a proper bid, and suggested he still would like to bid. All bidders must submit their APAs no later than this Friday, March 22.
Brian Davidoff of Greenberg Glusker, the law firm representing Rhythm & Hues, told Variety Shim’s communications with them had also suggested he intended to submit a bid at the end of the week. Shim spent quite a bit of time on-site at R&H’s El Segundo HQ working on a plan for the company. He also met privately with Universal and Fox.
Though Shim is leaving the door open for JS to submit a bid on Friday, other sources close to the process do not expect JS to re-enter the bidding. Some financial experts were always skeptical about the JS bid because it was non-binding. Non-binding stalking horse bids are almost unheard of.
The stalking horse bidder in a bankruptcy proceeding sets a minimum price for the asset sale. If another bidder wins the auction, the stalking horse gets a “break-up fee.” Without JS, the process will continue without a stalking horse bid.
One silver lining for Rhythm & Hues: Its new owner, whoever that might be, won’t have to cover the $425,000 break-up fee the court approved for JS.
“When we prepared this whole process one never knows the way things are going to shake out, and we had planned for this eventuality,” said Davidoff. “So the fact that JS has pulled out does not affect our process and we still anticipate taking other bids by Friday.” The bankruptcy auction for R&H will proceed as scheduled on March 27, with the winning bid presented to the court the next day.
Other companies known to be circling R&H are Psyop and Prana Animation.
More to come…