DNEG, the visual effects and animation company whose credits include work on films “Dune,” “No Time to Die” and “Tenet,” plans to go public by merging with a special purpose acquisition company (SPAC). The proposed deal implies a combined company enterprise value of $1.7 billion.
According to DNEG, the pact will make it the only pure-play publicly traded VFX/animation company.
DNEG announced Tuesday an agreement to merge with Sports Ventures Acquisition Corp., a so-called “blank check” company set up for the purposes of combining with another entity to become a public company — which has become a popular alternative to a traditional IPO.
London-based DNEG expects to receive about $400 million in gross funds from the SPAC deal, including a “fully committed” $168 million common stock private investment in public equity (PIPE) from investors including affiliates of Sports Ventures, Novator Capital, affiliates of Fairfax Financial, and Arbor Financial.
The company disclosed that it projects approximately $400 million in revenue and adjusted EBITDA of $100 million for its fiscal year ending March 31, 2022. Upon closing of the SPAC transaction, expected in the first half of calendar year 2022, the combined company will be renamed DNEG and it is expected that shares will be listed on the Nasdaq exchange. The newly public company will be led by Namit Malhotra, DNEG’s chairman and CEO.
DNEG was formed through the 2014 merger of Prime Focus (founded in 1997) and Double Negative (founded in 1998). In 2021, the company won the visual effects BAFTA and Oscar for Christopher Nolan‘s “Tenet.” Other film and TV credits include “The Matrix Resurrections,” “Ron’s Gone Wrong,” “The Flash,” “Sonic the Hedgehog 2,” “Jurassic World: Dominion,” “The Gilded Age,” “The Wheel of Time,” “Foundation,” “Ghostbusters: Afterlife” and “Zack Snyder’s Justice League.”
“This transaction creates long-term stability for our teams while also allowing us to exploit the tailwinds in the media and entertainment industry and the explosion in demand for content, which are huge growth drivers for our company,” Malhotra said in a statement. “Leveraging our leading technology stack, DNEG is already making great strides into new growth areas such as gaming and content creation partnerships, and we are perfectly positioned to exploit massive new opportunities in the metaverse and the convergence of all forms of content creation.”
The proposed SPAC deal has been unanimously approved by the board of directors of Sports Ventures and DNEG; it remains subject to approval by Sports Ventures’ stockholders and other customary closing conditions. Under the agreement, current DNEG equity holders will retain approximately 71% ownership in DNEG and will roll 85% of their equity interests into the merged company (assuming no redemptions by Sports Ventures’ existing public stockholders).
DNEG operates nine studios across the globe, located in London, Vancouver, Mumbai, Los Angeles, Chennai, Montréal, Chandigarh, Bangalore and Toronto.
DNEG’s competitors include Peter Jackson’s Weta Digital, which sold its technology and tools business for for $1.625 billion last fall to game-development software vendor Unity. Also last fall, Netflix bought Scanline VFX, the company that has worked on Netflix originals like “Stranger Things” as well as tentpole movies for Marvel, DC and others.