Oscar-winner DNEG closes in on blockbuster float

The Oscar-winning visual effects producer whose credits include First Man and Bladerunner: 2049 is putting the finishing touches to a blockbuster London share sale that could value it at close to £1bn.

Sky News has learnt that DNEG, which was originally called Double Negative, is preparing to launch one of the City’s most prominent initial public offerings (IPO) of 2019.

Sources said the company was aiming to announce its intention to float later this month, and potentially as early as next week.

That would make DNEG an outlier in seeking to make its public debut amid uncertainty about the terms and timing of the UK’s exit from the European Union.

A slate of new board members has been lined up to help steer DNEG through an IPO.

According to recent filings at Companies House, they include Tom McGrath, the former chief operating officer of film and TV studio STX Entertainment; Mark Opzoomer, who sits on the board of Peppa Pig-owner Entertainment One; and Sangeeta Desai, the former chief operating officer of Bob the Builder’s owner, Hit Entertainment.

If successfully completed, DNEG’s listing would bring a five-times Academy Award-winning visual effects house to the London stock market.

More from Chernobyl

DNEG, which is owned by the Indian company Prime Focus World, counts the Sky and HBO drama series Chernobyl among its most acclaimed recent projects.

Its other film credits include Venom, instalments in the Harry Potter film franchise and Interstellar, for which it won an Oscar in 2014.

DNEG’s IPO is likely to involve the sale of new shares worth tens of millions of pounds and possibly more than £100m.

Bankers are understood to have flagged the potential for DNEG to be worth well over £500m and potentially close to £1bn once the proceeds of a primary share issue are factored in.

DNEG’s strong pipeline of new film and television projects, and the international nature of its work, are expected to insulate it from any prolonged market downturn, although serious equity market turmoil could yet prompt it to postpone the deal.

The company, founded as Double Negative in London in 1998, is recognised as being among the world’s leading producers of visual effects.

It is run by Namit Malhotra, the founder of Prime Focus and engineer of the 2014 deal which combined the two creative studios.

As well as its five Academy Awards, DNEG has also scooped five BAFTAs during its 21-year history.

Accounts filed at Companies House for the year to March 2018 show that the company recorded a gross margin of over 50% during the period, illustrating the highly profitable nature of its activities.

The company reported revenue of £108.2m and a pre-tax profit of £12.8m for the year.

DNEG employed more than 1,000 people at the date of those accounts, a figure which is thought to have risen since then.

Its planned flotation follows the sale of a number of leading visual effects companies and post-production houses, including Foundry, which was sold to New York-listed Roper Technologies in March for more than £400m.

Political uncertainty has been one of the factors weighing on the City’s IPO market this year, with few high-profile market debuts.

One exception has been Trainline, the rail ticket booking app, which has seen its shares rise more than 15% since its debut last month.

Another successful listing has been that of the payments company Network International.

However, the uncertain Brexit backdrop and poor performance of other recent issues such as Aston Martin Lagonda and Funding Circle, the peer-to-peer lender, have contributed to a souring of sentiment among institutional investors.

JP Morgan, the Wall Street bank, is leading the DNEG IPO, while bookrunners on the deal are understood to include Numis Securities.

A spokesman for DNEG declined to comment on Friday.

Source : Sky News