Evidence of meeting #18 for Canadian Heritage in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was company.
A recording is available from Parliament.
12:05 p.m.
Liberal
12:05 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
Yes, and it has always been.
12:05 p.m.
Liberal
Ruby Dhalla Liberal Brampton—Springdale, ON
The third thing is that in the light of emerging economies, there are going to be many collaborations and partnerships taking place, not only in your industry but I think in others going forward. In your current situation there is a desire by an American investor for a takeover rather than a cooperation or a collaborative approach.
What steps do you think the minister or the government of the day should be taking—should they be taking any steps—to help protect Canadian entities and Canadian companies and ultimately Canadian jobs and Canadian workers?
12:05 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
All we can ask for from this committee is to be heard and understood; that the committee understand the risk of what we think could potentially happen and hopefully support our position. Clearly, we understand that there is nothing that Heritage can do unless Mr. Icahn goes over 33%. I think the main point for us today is to make everybody aware of what we have done and what we believe the risk to the Canadian cultural industry we're involved in is.
Obviously you are all far better equipped than I am to figure out what could and should be done.
12:05 p.m.
Member of the Board, Lionsgate Entertainment Corporation
Just to add to that, the reason we're having this conversation with this committee is that it is a cultural industry. I think it's absolutely crucial that everybody understand that the rules that are set here today and applied by the minister are rules that are part of an enormously complicated fabric of structures that support Canadian cultural industries, and when you pick apart one little part and say “foreign ownership is not such a bad thing for cultural industries and let's just not pay attention to it”, you unwind that fabric.
Your colleague suggests that this is a very powerful company that has come out of a small country. It takes an enormous amount of effort on behalf of the government of the day to continue to ensure that we have these kinds of companies in Canada. I urge everybody not to lose sight of... It may seem that it's just a business deal; that it means nothing, it's just some jobs, maybe not a lot, who knows? But at the end of the day we're supporting Canadian culture; that's what it's about. That's why net benefit applies in this case and maybe not in some other businesses that are being taken over.
That's why we ask the question: is this serving the people of Canada? I would just say that culturally we cannot afford to ignore the fact that this is one of the primary cultural industries in this country.
12:05 p.m.
Conservative
The Chair Conservative Gary Schellenberger
Thank you.
We now go to Mr. Uppal, and then we'll finish off with Mr. Masse.
12:05 p.m.
Conservative
Tim Uppal Conservative Edmonton—Sherwood Park, AB
I'll share my time with Mr. Del Mastro, if there is any time at the end.
At the end of the day, this is still a business deal, and we have the side of the net benefit to Canada, but you have already said that it seems to be the case that your stock value is low, and this is probably the reason why this group is interested.
What if the offer was just a really good offer? What if it's an offer that your board of directors would look at—or anybody would look at, not just your board of directors—as a business deal and say, “That's a very good offer, and that's a lot of money”, and if the average person would look at it?
What then? Are we still on the “net benefit to Canada”?
12:10 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
We would expect that Heritage would still do their job.
Again, we're bringing two totally separate issues together. Our job as a board is to look at any offer that could provide value to our shareholders; that's all we're interested in.
The board operates very independently. I can assure you, I virtually knew nobody on this board. When they have come on, we've always tried to get independent people who are very strong. Ms. Yaffe is one of our most recent board members and is one of the most important people in the Canadian entertainment industry historically.
So that's up to the board, and it's frankly sometimes up to the shareholders. Just so that everyone is clear, if we were to buy MGM, there would be a shareholder vote. We would not be able to decide on buying MGM.
So the value to our shareholders is a separate issue. We're here today, again, to suggest that you apply the standards that you have set—the net benefit to Canada—on any transaction, and we would expect you to do that.
12:10 p.m.
Conservative
Tim Uppal Conservative Edmonton—Sherwood Park, AB
Just to be clear, you said your job or the board's job is to ensure that the shareholder is getting value for money, or to protect the shareholder. Are you saying that if there's an offer that is really that good, you still say we should apply net benefit to Canada?
12:10 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
It's not my job, but I have been told, and in everything that I've read—
12:10 p.m.
Conservative
12:10 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
—that is the job of Heritage, if a shareholder is going to go over 33%: to measure and apply that rule.
12:10 p.m.
Member of the Board, Lionsgate Entertainment Corporation
In fact, it's not our request; it's a requirement of the law, and it's a determination that the minister has to make.
12:10 p.m.
Conservative
Dean Del Mastro Conservative Peterborough, ON
Just to pick up where Mr. Uppal is, I think there's an obvious point to it, though. If the offer was something that the board liked, you wouldn't have been on the Hill speaking to members—I assume primarily members of the opposition, because I never saw anyone from the company, but I know there was a lobbying effort on the Hill to try to block the takeover.
I assume that if the price were where you wanted it, you wouldn't be on the Hill trying to block it using “net benefit for Canada”. I think that's a fair question.
12:10 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
I think that's probably right.
12:10 p.m.
Conservative
12:10 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
I think that's a fair point.
12:10 p.m.
Conservative
Dean Del Mastro Conservative Peterborough, ON
Ultimately, some would say the Icahn Group was arguing the other day that if they don't take this thing over, it's going to be run right into the ground and there's not going to be anything left. You obviously don't feel that way.
Where is Lionsgate going?
12:10 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
I haven't run it into the ground in ten years.
12:10 p.m.
Conservative
Dean Del Mastro Conservative Peterborough, ON
If you stay on track right now, how bright is the future for Lionsgate, in your opinion?
12:10 p.m.
Chief Executive Officer, Lionsgate Entertainment Corporation
I think the future's incredibly bright. We just put out a fantastic earnings announcement. We had guided to $75 million of adjusted EBITDA; we actually reported almost $130 million. We had a very strong revenue year, we are forecasting growth of around 13% to 15% revenue this year, and we're seeing growth in every one of our businesses.
Our channel platforms are working very well. In our television business, we picked one network series to do. This is Running Wilde, the pilot for which, as I said, was shot in Vancouver. We picked one and it got picked up. Our shows Mad Men, Weeds, Nurse Jackie are hits.
So actually our business is vibrant; it's vital. As I said, our employees are incredibly motivated because of their participation, their ability to make decisions. I think the company is in fantastic shape. Our balance sheet is in great shape.
I understand that somebody who wants to run a proxy has to criticize management, but at the end of the day, we believe we're in very good shape.
12:10 p.m.
Member of the Board, Lionsgate Entertainment Corporation
I want to say that the board believes that as well. It's certainly not just a management perspective. We've spent hours and hours going over the plan. We understand the choices that have been made and we're very supportive of them.
12:10 p.m.
Conservative
Dean Del Mastro Conservative Peterborough, ON
That's great.
I'd just close off by saying that my wife and I watch Nurse Jackie every week.
12:10 p.m.
Conservative
The Chair Conservative Gary Schellenberger
Thank you for that.
The last question goes to Mr. Masse, please.
12:10 p.m.
NDP
Brian Masse NDP Windsor West, ON
Thank you, Mr. Chair.
When you look at Mr. Icahn's history, it reads like a movie. In fact, there has been a movie on it.
Aside from potentially stopping the production and distribution of another Saw movie, there would be really no net benefit, in my opinion.
There's a threshold, though, in terms of the takeover. What is the estimated value of Lionsgate right now?