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to the acquisition jointly elected, pursuant to section
338(h)(10), to treat the acquisition of the stock as an asset
acquisition. At the time of the acquisition, Technicolor’s
primary activities were film processing and videocassette
duplication. The film division provided film processing and
related services to major film studios. The videocassette
duplication division manufactured prerecorded videocassettes for
home video and nontheatrical markets.
Technicolor, a leading film processing company, had an
experienced management team, sophisticated equipment, and
proximity to the studios’ filming locations. In addition,
personal relationships, between Technicolor’s and the major film
studios’ executives, facilitated client development and
retention.
The film processing market was extremely competitive, and
major studios used their strong bargaining power to negotiate
large up-front payments (e.g., Technicolor made a $65 million
payment to renew a contract with Walt Disney Pictures), volume
discounts, “most-favored-nation” provisions,5 and other
contractual concessions from film processing companies.
Technicolor’s major competitors were Deluxe Laboratories, Inc.
5 Most-favored-nation provisions ensured that a customer
would get the same pricing as any other customer ordering the
same volume of services.
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Last modified: May 25, 2011