TORONTO — Amid much kerfuffle about the C$2.3 billion ($1.94 billion) deal inked by CanWest Global Communications of Winnipeg and U.S. investment bankers Goldman Sachs to buy Alliance Atlantis Communications, little has been said of what the future may hold for AAC’s film distribution business.
The Motion Picture Distribution income trust, which is 51% owned by AAC, is by far AAC’s smallest division. AAC’s specialty channels are thought to be worth $1.26 billion, its 50% interest in hit TV skein “CSI” is worth about $590 million and motion picture distribution is what’s left, little more than a rounding error — about $152 million according to one analyst, though others have valued it at almost twice that.
And yet, AAC’s motion picture distribution arm is the largest independent distributor in Canada, far bigger than the next-largest distributors — Maple Films, Christal Films and Equinoxe — combined.
The company has several lucrative output deals with the likes of Miramax, New Line, and the Weinstein Co. going for it, and also owns Momentum Pictures in the U.K. and Aurum in Spain.
Whatever Canada’s broadcast regulator makes of the takeover of AAC’s broadcasting assets, the distribution end of the deal has to run another gauntlet: Film distribution is regulated as a cultural industry, and the Investment Canada Act is pretty definitive on the subject. “Takeovers of Canadian-owned and -controlled distribution businesses will not be allowed.”
So how do they plan to pull this off? Goldman Sachs can hardly claim that CanWest will be running MDP, since CanWest has already said it has no interest in that.
Between now and closing (probably the middle of the year at the soonest), Goldman Sachs has to find a Canadian buyer or buyers for MPD.
“Obviously the Goldman Sachs people are pretty sophisticated. They must have had discussions and possibly even made arrangements so that when there is control taken of that interest, it will be by some Canadian group,” opined Toronto-based entertainment lawyer David Zitzerman, who has done some work for CBS on the “CSI” end of the CanWest-Goldman Sachs deal.
Alliance Atlantis had put MPD up for sale in the autumn, but halted the process after the CanWest Global/Goldman Sachs deal was announced. Far from indicating the sale is on the shelf, however, the move probably means Goldman Sachs already has a buyer sewn up.
“If they’re saying it’s no longer on the market and it’s not a strategically core asset for CanWest,” says Ted East, prexy of the Canadian Assn. of Film Distributors and Exporters, “they must have gone some distance to structuring the deal.”
And while there is little information about who the buyer or buyers might be, the individual most likely to head any such arrangement is Canadian distribution impresario Victor Loewy, probably the most well-connected and certainly one of the most outspoken execs in the biz.
Alliance co-founder Loewy helmed the distribution business at Alliance Atlantis until a major falling-out with the mothership last autumn. The two have since made up, with Loewy as an independent consultant and chairman emeritus running the New Line contract.
In addition, do not be surprised to see the re-emergence of ousted MPD CEO Patrice Theroux and general counsel Paul Laberge, both of whom were shown the door last summer, reputedly for courting London-based hedge fund Marwyn Investment Management and — wait for it — Goldman Sachs as potential buyers.