Infogrames to Acquire GTI

GT Interactive is being acquired by Infogrames. I don’t know if this was the cause of the Trans-Am ’68-’72 cancellation, but I bet it didn’t help.

GTI has been in financial trouble for a while, and the surprisingly low sale price of $135 million certainly appears to indicate how close to the margin it had been running. Plenty of details of the stock swap were forthcoming, yet no mention was made of the liabilities Infogrames would assume. Considering that GTI has a number of profitable titles and licenses the price tag on this one smacks of a fire sale. By renegotiating terms with GTI’s bank, retaining the GTI name, and putting new management on top, Infogrames might just be able to turn it around. After they pay the outstanding fees to the developers who recently started suing them…

Press release:

Infogrames Entertainment to Acquire Controling Stake in GT Interactive Software

LYON, FRANCE, NEW YORK, NY & SAN JOSE, CA, November 16, 1999 – Infogrames Entertainment S.A., an established leading developer, publisher and distributor of interactive entertainment, today announced it has reached an agreement to acquire control of GT Interactive Software (GTIS), a US-based company for a total investment of $135 million.

This development effectively transforms the landscape of the global video games industry. As a result of this transaction, Infogrames will rank as one of the top interactive entertainment companies worldwide.

This transaction is intended to benefit the shareholders of both companies. As a result of this transaction, GTIS will have enhanced financial, distribution and managerial resources and will remain listed on NASDAQ. In GTIS, Infogrames acquires an interest in seven award-winning internal development studios, among which are Humongous Entertainment, Cavedog, Single Trac, Entertainment, WizardWorks Legend and Reflections.

Through this transaction, Infogrames will be able to expand its impressive product offerings of such franchises as Mission Impossible, Test Drive and Looney Tunes to include GTIS best-sellers like Driver, Deer Hunter, Blues Clues and Abe’s Odyssey. This transaction continues Infogrames’ global expansion by firmly establishing it in the North American interactive entertainment market, estimated to reach $7 billion in sales next year.

Infogrames Agreement with GTIS

— Infogrames will purchase 33.4 million GTIS common shares from the founding Cayre family for $25 million, implying an average price of 75 cents per share. The Cayre family has also committed to provide Infogrames with a proxy for the 1.3 million shares that will still be owned by the Cayre family upon closing of the transaction.
— Infogrames will purchase 28.6 million newly issued shares for $50 million. Infogrames will also purchase a convertible note from GTIS for approximately $60.5 million, which will be convertible into GTIS common shares at $1.85 per share for a total of 32.7 million shares. As part of the consideration for the $60.5 million convertible note, Infogrames will acquire and surrender to GTIS the $10.5 million junior debt owned by members of the Cayre family.
— GTIS will issue a new $50 million convertible note to funds managed by General Atlantic Partners, in exchange for $30 million in preferred stock and a $20 million subordinated note held by General Atlantic Partners. The note will be convertible into GTIS common shares at $4.00 per share. In addition, General Atlantic Partners will transfer to Infogrames warrants for the purchase of 4,500,000 GTIS common shares.
Following this transaction, Infogrames will hold approximately 70% of the outstanding common stock of GTIS, assuming conversion of Infogrames’ convertible notes. Infogrames will also have the right to appoint a new board of directors. As part of the transaction, GTIS’ bank syndicate has agreed to amend its credit agreement with GTIS.

Infogrames founder and Chairman Bruno Bonnell said, “This transaction demonstrates our commitment to making Infogrames the No. 1 player in this market. In the past two years, we have demonstrated our ability to purchase and turn around such companies as Ocean in the UK and Philips Media’s European assets. Similarly, I am confident that Infogrames can drive GTIS back to profitability.”

GTIS Chairman & Chief Executive Officer Tom Heymann noted: “Joining Infogrames, a proven world leader, will add value for our shareholders. It is the right move for our company and it opens a new chapter for GT Interactive Software. There are great synergies between our catalogs, which feature such best-selling titles as Driver and Infogrames’ Mission Impossible and Test Drive franchises. Also, I would like to emphasize the key role played by the Cayre family in facilitating this transaction; their acceptance of a price for their shares that is significantly below the price at which Infogrames is investing in the company will benefit both shareholders and employees by allowing them to participate in a new stage of GTIS’s development. ”

Effective immediately, Bruno Bonnell and Thomas Schmider, Infogrames’ Chief Operating Officer, will actively participate in refocusing GTIS operations with Tom Heymann. In a related development, Infogrames announced the appointment of Pierre Sissman to the newly created position of president of Infogrames’ European operations, thereby permitting Messrs. Bonnell and Schmider to devote proportionally more of their time to North American operations. Mr. Sissman joins Infogrames after an 11-year career with various Walt Disney Company units in Europe, most recently as Executive Vice President of The Walt Disney Company (Europe).

Mr. Bonnell added: “I am really excited about the opportunity we have to re-energize this company, which has so much potential. The combination of our companies’ product offerings, together with a restructured distribution network, should greatly benefit both sets of shareholders.”

Mr. Heymann noted: “Infogrames’ investment will enable us to capitalize more effectively upon our great mix of products, which include Driver and Deer Hunter, two of the best-selling titles in the world over the past four months.”

This transaction is expected to be slightly accretive to Infogrames’ earnings before goodwill amortization for the fiscal year ending June 30, 2000. Infogrames expects that with the benefit of a full year of combined operations, and improved efficiencies implemented by the new management, the earnings of Infogrames will be enhanced before and after goodwill amortization in the year ending June 30, 2001.

Both companies intend to explore new opportunities afforded by this association, including in the areas of distribution and marketing.

Since its founding in 1983, Infogrames has attained critical mass through a carefully planned strategy combining internal growth and acquisitions in all the key global interactive software games markets. In June 1999 the company acquired privately held publisher Accolade in San Jose, Calif, for $60 million and merged its operations with Infogrames’ existing distribution network to create Infogrames North America.

Additional details regarding today’s deal will be announced in the coming weeks. Pursuant to the securities purchase agreement, the company will grant Infogrames registration rights covering the shares of GT Interactive common stock to be issued to Infogrames.

Lazard Frères & Co. llc acted as financial advisor to Infogrames while Bear Stearns & Co., Inc. represented the interests of GTIS. Pillsbury Madison & Sutro LLP and Kramer Levin Naftalis & Frankel LLP acted as legal advisors to Infogrames and GTIS, respectively.

Infogrames Entertainment

Headquartered in Lyon, France, Infogrames Entertainment (Paris Bourse: SICOVAM 5257; Bloomberg: IFG) is a leading company in the development, design, publishing and distribution of interactive entertainment software for Nintendo, Sega and Sony consoles and PCs. The company was founded in 1983 by its Chairman and CEO, Bruno Bonnell. The company ranks as one of the top interactive entertainment software companies worldwide.

Infogrames develops and distributes award-winning PC and video games for all the top game consoles, including Segaâ DreamcastÔ , NintendoÒ 64, Nintendo Game Boy Color, PlayStationâ , and personal computer platforms. Its catalog includes world famous licenses such as Warner Bros. “Looney Tunes” and “Mission: Impossible” from Paramount. Original titles include “V-Rally”, which has sold over 4.7 million units across nearly 60 countries. Infogrames owns one of the largest distribution network in the industry in Europe and Australia. For more information on Infogrames latest news developments, visit: www.infogrames.com

GT Interactive Software

Headquartered in New York, GT Interactive Software Corp. (Nasdaq: GTIS) is a leading global developer, publisher and distributor of interactive consumer software. The company maintains four divisions: Children’s Publishing, Leisure Publishing, Frontline Publishing and Distribution. The company has publishing operations throughout the world with offices in the US, Canada, UK, Germany, France, Holland and Australia. GT Interactive also has seven internal development studios: Humongous Entertainment, Cavedog Entertainment, SingleTrac, WizardWorks, Oddworld, Legend Entertainment and Reflections. GT Interactive’s ecommerce system provides secure online transactions through each of the studios’ Web sites and www.gtstore.com. GT Interactive can be found on the Internet at www.gtinteractive.com.