A planned cash injection into French set-top box maker Technicolor SA hit a snag on Monday as the group said it had rejected a higher offer from an investment fund managed by JPMorgan on the grounds it imposed unacceptable conditions.
Technicolor turned down a revised offer to buy a 30%-stake for 179 million euros and said it had opted instead for an original, lower offer of 169 million euros which it said was better structured.
The move signals an increasingly intricate game of brinksmanship between Technicolor and JPMorgan, as both try to iron out the details of a deal that has been in the works for several months but was recently upset by the emergence of another bidder.
Shares in Technicolor touched a high of 2.109 euros, their highest since late March, and were up 3.1% at 2.031 euros by 1008 GMT as some investors expected JP Morgan to revise its offer yet again.
Technicolor, which is trying to pay down debt and enact a turnaround plan, said it would now try to get shareholder approval for the earlier offer of 169 million euros from JPMorgan's Jesper Cooperatief fund.
Under the new deal, JPMorgan offered more money, but made it harder for Technicolor to retreat from the deal by forbidding shareholders to vote on a rival offer from San Francisco-based Vesper Capital at the June 20 shareholder meeting.
It also imposed higher break fees.
"The uncertainty created by the new condition outweighed the benefits of the amended proposal," Technicolor said in a statement.
JPMorgan and Technicolor had appeared ready to seal their deal when private equity investor Vector Capital made a higher offer than JPMorgan in late May.
Vector offered 1.90 euros per share for a 17.5%-stake, then subscribe to a second issue to existing shareholders at 1.56 euros per share, Technicolor said.
The move may have spurred JPMorgan to improve its offer, but also seek guarantees that the deal would be sealed by shareholders in June.
"JP Morgan raised its offer, but it was accompanied by unacceptable conditions. Investors now expect a new proposal," said one analyst.
Technicolor has struggled for years to enact a turnaround plan that would reduce its fixed costs and allow it to compete against lower-cost set-top boxes produced in China and Tunisia.
After cutting 6,000 jobs last year, Technicolor said it aimed to reduce debt by between 200 million euros and 300 million and generate 400 million in free cashflow in 2012 through 2015.
It has been seeking a partner for its loss-making set-top box business and a buyer for its last remaining factory making the devices in France, which filed for insolvency earlier this month.
According to media reports, Technicolor has also been fending off a demand by activist investor Daniel Loeb, owner of Third Point, to sell its licensing business. Third Point has reduced its stake in Technicolor in recent weeks to below the 5% disclosure threshold.