Group Takes 51% Stake in Four Media

Wall Street investment firm Warburg, Pincus Equity Partners is taking a majority stake in Burbank-based Four Media Co., in a move that will infuse the post-production company, known for its high-tech editing studios, with the capital it needs to expand worldwide.

Four Media, which has worked on Star Trek films and the Oscar-winning “What Dreams May Come,” plans to broaden its alliance of full-service editing studios by buying post-production companies in Europe and Asia, said Sandra Mays, Four Media’s vice president of investor relations.

Last week, Four Media shareholders approved the deal, in which Warburg Pincus paid $80.1 million for 10.2 million shares, or a 51% stake, in the company.

The acquisition, which Four Media executives like to refer to as “an equity investment,” could be a good deal for both sides. Warburg Pincus is buying Four Media at about $7.85 a share, which is 44% less than its 52-week high of $11.50.

Four Media stock closed Monday at $6.38.

And Four Media gets an infusion of capital with few strings attached.

“We don’t really view this as a takeover because there is no intention to change management,” said Mays, who said that senior executives at Four Media have recently signed five-year contracts and won’t be affected by the change in ownership. “This deal is a great way to get capital and to build a strong Wall-Street connection.”

Four Media is projected to gross $200 million this year from its network of 16 post-production facilities that span every service from film-to-video transfers to computer-animated graphics. The company has facilities in Southern California, San Francisco and Singapore.

In an industry teeming with competition, Four Media has an advantage over other editing companies, the company says, because it can handle all post-production needs under one roof.

“It’s one-stop shopping,” Mays said. “Producers and directors can bring their work here and do everything on-site. You don’t have to go to one place to do sound editing and then drive across town for visual effects.”

The deal, which still needs regulatory approval, will help strengthen Four Media’s strategy of running facilities like small, independent boutiques but equipping them with the cutting-edge technology that only a well-financed firm can afford, Mays said.

For the second quarter ending Jan. 31, Four Media reported record earnings of $2.3 million, or 19 cents a share. That’s up from $693,000, or 7 cents a share, for the same quarter in 1998. The company also reported that revenue increased 67.5% to $47.9 million, boosted by a 138% gain in the television division.

“We continue to see favorable opportunities for growth, both domestically and internationally,” said Robert T. Walston, chairman and chief executive.