MGI Software Raises $10M for Acquisitions

Publicly traded MGI Software Inc. raised $10.5 million through a private placement of 4.8 million shares of stock to finance its acquisition of Live Picture Inc. and the software digital video disk (DVD) assets of Zoran Corp. The Toronto-based company develops digital imaging and video editing software for the personal computer.

The financing, which closed July 1, ran concurrent with the Live Picture acquisition. MGI formally acquired Zoran’s assets July 5. Perseus Capital LLC of Washington D.C., and Trans Cosmos Inc. of Tokyo invested in MGI after owning minority stakes in Live Picture. Encompass Media Group Inc. of Bellevue, Wash., also participated in the round. Perseus received a board seat as part of the deal.

“As Live Picture began to come apart, we were able to hold the company together before we found a buyer,” said Perseus Executive Vice President Ken Socha. “After due diligence, MGI seemed like a credible fit and had the skills that Live Picture didn’t have.”

Live Picture developed panoramic imaging solutions for e-commerce, real estate and travel tours and Web site development. Although the company raised $22.25 million in January 1998 (PEW, Jan. 26, 1998, p. 2), it was unable to compete with Interactive Pictures Corp. and Bamboo.com.

The acquisitions were valued at $4.5 million. MGI Chief Executive Anthony DeCristofaro said the company will use the remaining proceeds for product development and to market its new assets.

“The deal gives us the core technology to allow us to be more flexible in partnering with (personal computer) manufacturers,” he said. “We will be a key supplier of entertainment for the PC as it becomes integrated with DVD technology.”

The company currently provides digital photography services for the e-commerce divisions of Bloomingdales, Playboy and The Gap.

“We are streaming images in still photography just as Real Networks is with audio,” DeCristofaro said.

MGI, which was incorporated in 1995, currently trades on the Toronto Stock Exchange. DeCristofaro said he expects the company to be quoted on the NASDAQ Exchange this fall.

Perseus invested through its 1996 fund, which included Live Picture as a portfolio company, and Perseus Capital LLC, its $100 million 1999 fund, which is approximately 65% committed. The fund invests in growth and buyout stage opportunities in the information technology, biotechnology and manufacturing industries.