VFX/animation giant DNEG to go public via $1.7bn SPAC merger deal

DNEG has worked on hit shows such as Stranger Things

UK-based VFX and animation giant DNEG is set to go public via a merger with special purpose acquisition company (SPAC) Sports Ventures Acquisition Corp.

The proposed transaction, which values the merged company at around US$1.7bn, is expected to close in the first half of 2022. Upon closure of the deal, the combined entity will be listed on the Nasdaq as DNEG.

DNEG is among the largest VFX and animation companies in the world and has worked on high-profile TV series such as Stranger Things, Westworld, Black Mirror and Defending Jacob, as well as blockbuster films such as Tenet, Dune, Inception, Avengers: End Game, F9: The Fast Saga and Mulan.

The deal with Sports Ventures Acquisitions Corp – a blank-cheque company launched with the goal of merging with a major entertainment firm – will give DNEG US$400m in gross transaction proceeds, including a fully committed $168m in private investment in public equity, also known as PIPE.

DNEG said the transaction means it will become the “only pure-play publicly traded visual effects and animation company.”

Formed in 2014 through the merger of Prime Focus and Double Negative, DNEG has operations in North America (LA, Montréal, Toronto and Vancouver), Europe (London) and Asia (Bangalore, Chandigarh, Chennai and Mumbai), employing an estimated 7,000 people.

DNEG said the new investment will allow it to hire more staff and expand into new international markets. The company also said the proceeds will allow it to expand into new lines of business, including gaming and content creation, and pursue “accretive acquisitions and partnerships.”

Existing DNEG equity holders will retain approximately 71% ownership in DNEG and will roll 85% of their equity interests into the new entity.

DNEG chairman and CEO Namit Malhotra said: “This transaction creates long-term stability for our teams while also allowing us to exploit the tailwinds in the media and entertainment industry and the explosion in demand for content, which are huge growth drivers for our company.

“I am excited to take the best of everything that makes our company so successful and to use it as a platform on which to build and innovate further. Leveraging our leading technology stack, DNEG is already making great strides into new growth areas such as gaming and content creation partnerships, and we are perfectly positioned to exploit massive new opportunities in the metaverse and the convergence of all forms of content creation.”

The deal has been approved by the board of directors of both companies. It remains subject to approval by Sports Ventures’ stockholders and other customary closing conditions.

In recent months, DNEG has made several hires and appointments, including the promotion of Tom Jacomb to the role of president of its animation division. It also recently hired DreamWorks employee Kara Oropallo as its VP of training, outreach and artistic development.