Rhythm & Hues Seeks New Capital Funds

Rhythm & Hues Studios is hunting for new capital, and the visual effects company may have to sell a minority stake to get it.

According to a report by Variety [1], R&H has enlisted independent banking firm FocalPoint Partners to help raise almost $20 million in equity to fund the company's international expansion.

Rhythm & Hues is already talking to investors, but no deal is imminent. Variety reports that the company is not distressed and is seeking outside funding for growth opportunities, although R&H has recently had to increase the portion of work it looks to offshore from 40 to 80 percent.

Known for pioneering off-shoring of visual effects production, R&H has facilities in Vancouver, Malaysia and India and was one of the first American post companies to significantly break into China. Its further international expansion would focus on building facilities in low-cost locales, especially in Asia.

R&H's assets include backend stakes in future films on which the company has worked, including 20th Century Fox's Life of Pi. R&H no longer owns equity in any previously released films. More and more VFX companies are providing services at cost in exchange for backend participation on films on which they work, as Rhythm & Hues has done, in hopes of sharing in the success of those projects.

Rhythm and Hues film division president Lee Berger denied that potential investors could buy the company outright.

"We are not for sale," Berger told Variety. "However, we continue to raise money for our film fund, East Grand Films, and we are also speaking with potential joint venture partners regarding the company's continued international expansion."