Bidders are lining up in earnest now that Eastman Kodak's patent sale is set to resume.
After being placed on hold so that the 130-year-old photography pioneer could file for Chapter 11 bankruptcy protection earlier this year, the auction for more than 1,000 of Kodak's digital imaging patents is ramping up again, according to three sources close to the matter.
Investment banks Lazard Ltd and Jefferies & Company Inc, an adviser to the unsecured creditors committee, are working together on the patent sale, which they hope will bring in as much as $2 billion, the sources said.
The banking tandem had previously worked in similar roles advising bankrupt telecom-equipment maker Nortel Networks Corp on the sale of about 6,000 patents to an Apple Inc-led consortium for $4.5 billion.
"We anticipate a robust and lively auction process which will assist us in achieving our objective of monetizing our non-core IP assets," a Kodak representative said.
Kodak, the iconic company that invented the hand-held camera, filed for Chapter 11 bankruptcy protection on January 19.
The company, which holds 10,000 patents, will focus a significant part of its restructuring on finding a buyer for the 1,155 U.S. patents within its Digital Capture and Kodak imaging Systems & Services portfolios. The portfolios also include more than 500 foreign patents.
Kodak, based in Rochester, New York, is expected to retain the patents associated with its core printing business, two sources said.
A number of global competitors are likely to emerge as interested parties - some of which are embroiled in patent litigation with Kodak - with Intel Corp , Samsung , Apple and Fujifilm among a list of possible buyers, two sources close to the situation said.
The auction will follow the terms specified under Kodak's $950 million debtor-in-possession, or DIP, financing loan. That loan says that a motion has to be filed with the courts regarding the sale of the patents by June 30, 2012.
Kodak obtained its 18-month DIP loan from Citigroup Inc in February to continue operations while it went through the bankruptcy process.
"Consistent with the terms of our DIP agreement, we expect to file bidding procedures by June 30, 2012," the Kodak representative said.
Kodak has yet to send out a "teaser" document containing basic financial information to prospective suitors, two sources said. The auction process is expected to follow a bankruptcy court-administered sale known as a 363 deal, which involves a "stalking horse" bid in which a buyer agrees to make a bid for most of the assets, setting the floor price for the process, two sources said.
In the Nortel auction, it had received court approvals for a "stalking horse" bid made by a unit of Google Inc for its portfolio of technology patents valued at $900 million. After three months and several bidding rounds, Apple and its consortium, which included Microsoft Corp and Research in Motion Ltd , made a whopping $4.5 billion bid.
Earlier this month, Kodak agreed to sell its online photo services business to Shutterfly Inc for $23.8 million.
Kodak will seek bankruptcy court approval of the sale and auction procedures of that business by late March.
A U.S. bankruptcy judge told Apple last week that it cannot pursue patent infringement claims against Kodak now that the latter is in bankruptcy. The infringement claims center on a Kodak patent that lets consumers preview digital photographs on LCD screens.
Kodak had accused Apple of trying to slow the patent sale process.
Copyright Thomson Reuters 2012