Canadian Heritage Committee on June 1st, 2010

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

So it's less than 4%?

[Keith Schaitkin]

I don't know.

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

You don't know that?

[Keith Schaitkin]

No.

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

Okay, so we can't say that Lions Gate—

[Keith Schaitkin]

But I don't claim to be Canadian. We are not Canadian; we are American investors, and we have a Cayman Islands investment vehicle for offshore investors who invest—

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

But 4% is better than zero, then.

[The Chair, Conservative, Gary Schellenberger]

Okay, Ms. Dhalla.

We'll go on now to Madam Lavallée.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

I am not going to pull out a measuring stick to determine which of the two is more Canadian, but I do want to know whether either of you is a Canadian citizen.

Is either of you Canadian?

Are you Canadian?

[Keith Schaitkin]

No, I'm not Canadian.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

You're not either?

[Donald Ross, Legal Counsel, Osler, Hoskin & Harcourt]

No, I'm Canadian.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Are you an employee of Icahn Associates Corp. and Affiliated Companies, Mr. Ross?

[Donald Ross]

Ms. Rodal and I are partners in Osler, Hoskin and Harcourt, which is a Canadian law firm. We are employed by Icahn.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

So you are as well, Ms. Rodal. I just want to know who I am speaking to.

I do not want to get into who is Canadian and who is not. In any case, when you consider that this Canadian government deemed Globalive a Canadian company, it would not bother them too much to consider you Canadians in a few minutes, given Mr. Del Mastro's comments.

I want to know something. It is too bad because you are not part of the company. This committee studies heritage issues, and we are interested in the cultural changes that you would make.

In the past ten years, Lionsgate has invested $800 million in productions filmed in Canada and Quebec. They have produced 48 films and television series in Canada and Quebec. They have generated 20,000 jobs, according to Canadian Film & Television Production Association standards, and they have signed a $400 million partnership with the Société générale de financement du Québec to support production in Quebec.

What would you do better than them from a business perspective? Why do you want to take over Lionsgate? What cultural changes and improvements would you make? I am not talking about money here.

[Keith Schaitkin]

We look at Lions Gate as investors. We bought the company stock. We thought it was undervalued, and we're concerned about the direction that management is heading with the company. They're looking at expending a lot of money on what we consider to be risky acquisitions. We're concerned that management is investing a lot of money in what we consider to be high-cost, celebrity-vehicle films.

What we liked about Lions Gate and what we continue to like about it is the business they have been in and are in traditionally, which is film production and film distribution, much of it in Canada, and television production in Canada and elsewhere.

What we're concerned about is that we've got a management team that's risking the company on swing-for-the-fences kinds of transactions. If you want to try to compare us that way, I think the likelihood of Lions Gate continuing to be a viable, successful company and not taking excessive business risks is greater with us.

We tried, and it's well publicized, that we made a big investment to put a couple of people on the board—

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Forgive me for interrupting.

How much time do I have left?

[The Chair, Conservative, Gary Schellenberger]

You have about two minutes.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

I apologize for interrupting.

I just wanted to point out that you are giving me the worst possible answer I could get. You are telling me that you are making a cultural investment for money, but the cultural situation, both in Canada and Quebec, is much different than that in the U.S. It may be primarily a matter of money in the U.S., but, here, culture needs the support of the Canadian and Quebec governments in order to grow and flourish.

Furthermore, you do not seem to be aware of the whole cultural development issue and the fact that it is necessary to take risks. If we want Quebec and Canadian productions, we have to take risks because there are not enough people in Canada and Quebec to make every U.S. production viable. We have a completely different situation here.

I asked you about cultural development, and you answered in terms of money. I think you will make a poor investment.

[Keith Schaitkin]

I don't mean to be argumentative, but in order to have successful culture, to have successful films, to have successful distribution, and to have all these things operate, there is ultimately a financial aspect.

All I was saying to you was that Lions Gate can continue to be a successful, stable company. We're concerned that the direction management is taking puts that at risk, and therefore puts the cultural part of it at risk, as well as the business part.

We tried to address that by having Lions Gate allow us, as a large stockholder, to have some board representation so that we could have better communication, but we couldn't get any of that accomplished. Now we're buying more of the stock because we fear for the viability of our investment, which ultimately underlies the viability of all this cultural programming that you're discussing.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Mr. Angus, please.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you very much for coming today.

I guess the issue we are here to discuss is what the impact will be from the Icahn takeover, so I get back to the question of net benefit. We know what we have with Lions Gate. I mean, you tell us that they're a drop-box in Vancouver and nothing more, but I can look to $800 million in investments, I can look to television series they've done here, and I can see a film distribution company. I know what they do. I look at the Carl Icahn record and I see what the Icahn record is. I mean, you burn through companies one after the other in hostile takeovers, in many cases forcing them to sell off key parts of their assets, you pump up the stock, and you move on.

So what are you going to give us here today in terms of a net benefit commitment, so we'll know we're leaving this company in good hands?

[Keith Schaitkin]

Let me respond to the first part of your question very quickly.

Mr. Icahn owns investments in communications companies and railcar manufacturing companies. We have 10,000 employees in Canada working in our automotive factories through Federal-Mogul, and we have real estate businesses. We have businesses that we've owned for more than 20 years, gaming industries. To say that of the reputation.... Any time we get involved with companies, their managements make those kinds of statements and it tends to be negative. The fact is, with all due respect, that I think if you dig into it a little further, you'll find we have very deep, long-standing investments in many companies that we hold.

In terms of what this investment will do for Canada, net benefit for Canada is really what you're asking me. As I said, there is a privilege issue there. I would say this, as I said in my original statement: we think that what Lions Gate should be doing is focusing on its film distribution, producing niche films and television programming, and that will continue in the way it has, we would think, hopefully successfully. What we are concerned about is where they're moving the company to.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Again, I don't want to contradict you on the record of Icahn industries, but I'm looking at company after company—BA Systems, pushed to sell the company off; Biogen, breaking apart the company; Motorola, pushing them to sell off their mobile business. We see a pattern, and it's about the whole issue of shareholder value--getting that money up, selling pieces off. So you're going to flip Maple Pictures; that's gone. I still don't see what the vision is for the industry, for the commitments that have been made in Canada.

You're talking about the value to the company. What is the value, the net benefit, so we can go back to Parliament and say this is going to be a good purchase for Canada? What is the net benefit?

[Keith Schaitkin]

Unfortunately, you keep asking me about net benefit to Canada, and that area is privileged.