Hollywood visual effects studio DNEG will go public by a merger with Sports Ventures Acquisition, a special purpose acquisition company fronted by Atlanta Falcons co-owner Alan Kestenbaum with Inner Circle Sports’ Rob Tilliss and Steve Horowitz.
DNEG is a London-based studio that has won six of the last 10 Oscars for best visual effects, and whose work includes the latest Matrix installment, The Matrix Resurrections, as well as Avengers: End Game and Tenet. The merger values DNEG at an enterprise value of $1.7 billion.
“Leveraging our leading technology stack, DNEG is already making great strides into new growth areas such as gaming and content creation partnerships,” said DNEG chairman Namit Malhotra in a press release. “We are perfectly positioned to exploit massive new opportunities in the metaverse and the convergence of all forms of content creation.” Malhotra will remain atop the combined entities after the merger closes, expected later this year.
The Sports Ventures SPAC had its IPO for $230 million in January last year, with the intent to find a business in sports, media and entertainment, for which DNEG fits the bill. DNEG will own 71% of the public business, and the SPAC, its sponsors and additional private equity in public finance round (PIPE) investors the balance. Those PIPE investors will bring as much as $168 million to the table, and include Icelandic billionaire Thor Björgólfsson’s Novator Capital, as well as affiliates of the SPAC and investment firms Fairfax Financial and Arbor Financial. In addition to Kestenbaum and Inner Circle’s executives, the SPAC management includes Daniel Strauss, the CEO of asset manager GlassBridge and a board member of RocNation’s venture capital arm, among other responsibilities.
DNEG was formed in the 2014 merger of two special effects businesses, Double Negative and Prime Focus. In the years since, it has built a sizable business that has an order book as of September of $731 million for 2022 and beyond, according to the company. Among its current efforts is the upcoming season of Stranger Things, the sequel to the Daniel Craig and Ana de Armas film Knives Out and Jurassic World: Dominion, according to DNEG’s website. For the current fiscal year, ending March, DNEG probably will generate revenue of $400 million and adjusted earnings before interest taxes, depreciation and amortization of $100 million.
“The opportunity for expansion into new markets, such as gaming and the metaverse, as well as new markets for its core VFX and animation services, offers tremendous growth potential,” said Kestenbaum in the release.
