Crest Communication to acquire Hollywood studio - Views on News from Equitymaster

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Crest Communication to acquire Hollywood studio

Feb 15, 2000

Crest Communication (Crest) is set to acquire the Los Angeles based Rich Animation Studio at a price of $ 5 million. Crest is an entertainment house with presence in ad films, animation, graphics, television software and post–production facilities. The takeover is expected to be through a combination of stock and cash. World over media and entertainment stocks are booming. The Indian market has also been not immune to the craze. The market capitalisation of Crest Communication has increased more than ten fold from around Rs 625 m in July 1999 to over Rs 7,640 m in February 2000. It is this increase in the market capitalisation, which has enabled the company to partly fund the acquisition.

Crest tied up with Rich Animation studio in 1998. The logic for the tie up was the vast difference in rates for animation jobs per minute of screen time charged. In the US rates range anywhere between $ 5,000 and $ 7,000 per minute of screen time. Hence animation jobs are often sourced from Taiwan and South Korea where rates are as low as $ 1400 per minute. Animation studios such as Crest offer services at around $ 2,000 to $ 2,200 per minute.

The orders of Rich Animation would accrue to Crest and the clients of Rich Animation would be directly dealing with Crest. This would enable Crest to make a mark in the international market.

Market View:
Analysts are bullish on the stock primarily due to a change in the valuation of the media stocks themselves. Besides, over the past one year the company is also perceived to have got its act together.


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