October 15, 2019 / 4:19 PM / a month ago

Hollywood visual effects firm DNEG plans London IPO as Brexit looms

(Reuters) - Oscar-winning special effects firm DNEG aims to start taking investor orders in early November for its London listing, a source familiar with the transaction said, as the Oct. 31 deadline for Britain’s departure from the European Union loomed.

The company, which produces digital visual effects and has worked on the Harry Potter films and the Avenger series, said on Tuesday it would publish a registration document with Britain’s regulators for an initial public offering (IPO) in London.

Pending approval, it would likely publish an “intention to float” document next week, the source said.

DNEG boss Namit Malhotra and senior management would embark on a roadshow until late October and, barring any issues related to Brexit, they would open the book for orders from investors in early November, the source said.

“I think by then, management will have an idea of where we stand with Brexit and what the investor feedback is like,” said the source. “The deal is not going to be launched in the week of Brexit if the situation is still uncertain.”

Britain is due to leave the European Union on Oct. 31 with or without a deal, unless it has secured an extension to the deadline. Sterling strengthened on Tuesday on a report that British and the EU were close to a draft deal.

DNEG’s management have already met investors in early stage meetings, known as “pilot fishing”, receiving enough interest to encourage it to proceed with the IPO process.

JP Morgan Cazenove is global coordinator and joint bookrunner. The other bookrunners are Deutsche Bank, Numis, Santander and BNP Paribas.

DNEG has said it planned to raise 150 million pounds in primary proceeds. The source said it was likely to seek a $1 billion (791.20 million pounds) valuation, with a deal size potentially as high as $300 million.

DNEG has worked on shows such as Black Panther, Deadpool and the Avengers series, and has offices in India and the United States, although the listed company would be based in Britain.

Its clients include 20th Century Fox, Disney and MGM.

The source said the management viewed its relationships with video streaming services such as Amazon and Netflix as major areas for potential growth.

For the fiscal year ended 31 March 2019, DNEG said it generated total income of $309.0 million, profit of $20.7 million and adjusted earnings before interest, tax, deductions and amortisation (EBITDA) of $69.6 million, resulting in an adjusted EBITDA margin of 22.5%.

The company said it intended to use net proceeds from an issue of new shares to finance growth plans and reduce net debt.

Reporting by Abhinav Ramnarayan; Editing by Edmund Blair

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