Canadian Heritage Committee on June 3rd, 2010

[Dean Del Mastro, Conservative, Peterborough, ON]

We know the Icahn Group is obviously in communication with the department. They're prepared to make commitments to suggest what the net benefit of their takeover would be to Canada. Have you made any specific commitments that would counter that? Have you had discussions with them and indicated what Lionsgate is prepared to do for Canada's industry over the next number of years and how you intend to operate? Have you made those types of offers?

[Jon Feltheimer]

We have certainly tried to meet with the minister, and we certainly respect the fact that he wishes to remain neutral and therefore hasn't wanted to meet with us again.

I revert to what I said before, which is that we have an ongoing relationship in Quebec with SGF. We have ongoing conversations with the mayor of Edmonton, who has written a letter on our behalf saying he believes an Icahn Group takeover of Lionsgate would not be good for the city of Edmonton.

We have ongoing production all through Canada right now, and I think it's pretty clear what our commitment is to Canada. No one has asked us for a further commitment. Of course, we would be happy to have that discussion, but again, we are committed to Canada. We are committed to growing Maple. We are committed to the distribution and financing of French Canadian and English Canadian pictures. We are talking to Paul Haggis, a great Canadian writer and filmmaker, whose next film we're about to release in the next three days, starring Russell Crowe. We're talking to Paul Haggis as well about developing television shows with Canadian writers and directors. We are working on our investment in film and television production in Canada every day.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Next question, Mr. Simms, please.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you very much, Mr. Chair, and thank you to our guest.

From what I understand, Mr. Icahn has been critical of planned acquisition of MGM Incorporated as a studio, Walt Disney Company's Miramax Films division. He argued against buying these companies as he believes their film libraries are declining in value. Obviously, that's the starting point of my question, which is that he thinks you're getting into something that is...he didn't even say it was not really Canadian or not providing a net benefit to the average Canadian, but it was just simply not a good investment.

Why is it not a good investment, according to Mr. Icahn, or how would you refute that? On the surface it seems maybe it's not such a...the purchase for net benefit to Canadians doesn't really relate.

[Jon Feltheimer]

I tried very hard not to listen to a lot of the criticism. On MGM, for example, I think it's on the record that he offered us a bridge loan to buy MGM. I think there is a certain playbook that Mr. Icahn and his group follow on pretty much every acquisition. He takes a stake in a company. He comes in and says he wants to have talks with management. He finds some things he thinks he can be critical of to drive a wedge. That typically is what he looks for.

As I say, on MGM, which is the largest library we could possibly look at, he at one point offered us a bridge. I don't think he's even refuted that bridge loan.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

To buy the--

[Jon Feltheimer]

To buy MGM.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Which is what he doesn't want.

[Jon Feltheimer]

Well, again--

[Phyllis Yaffe]

Hard to tell.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Okay, understood.

[Jon Feltheimer]

I think it's really quite hard to tell. I think the key thing is that our strategic committee and our board of directors look at every acquisition in terms of the net benefit to our shareholders first, and then the net benefit that results from all our activities, and if the company is stronger financially because of a potential acquisition...we've built the company on acquisitions. The first thing we did when we refinanced Lionsgate many years ago was to buy Trimark and Artisan. That made us a stronger company. That provided the cashflow that creates the financial foundation on which we can produce film and television. That's exactly what those acquisitions did.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Meaning a net benefit to Canada, like Miramax, you mentioned.

[Jon Feltheimer]

The strength this company derived from having merged with libraries that create an ongoing, evergreen cashflow created the financial strength for us to expand all our television and film businesses. We would not be able, if you look at the trajectory--

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

And you would say this is a net benefit for Canada.

[Jon Feltheimer]

Of course I would.

[Phyllis Yaffe]

I think if Canada were the country of ownership that was controlling the rights at Miramax, that was controlling the rights at MGM, whatever company they were, that would be an enormous benefit to Canada, because clearly those are very powerful rights in the international marketplace, and if a Canadian company goes out with those products to sell as well as its own, the packaging of those two assets together makes the Canadian company much stronger. Of course it's a direct benefit to Canada.

The hard thing is, Canadian companies have a great deal of difficulty finding the resources to play at that level in the international marketplace, so when we go, as Canadian independent companies, wherever I've worked before, to try to sell one show or another, if you don't have that powerful library behind you, it's a much harder sell. So I would completely agree with Jon that this Canadian company owning libraries of that size and that prestige and that value is a very important benefit to Canada.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Obviously you've become a world player. Coming from a country this size, over 30 million people, that's a pretty good accomplishment. How does that happen? In a country of this size, Lionsgate becomes an international player to the point where someone like Mr. Icahn wants to take it over. He is considered to be--I won't use the terminology levelled against him--rather stealthy in his business dealings, we'll say. So he wants you and he considers you that valuable.

How does Lionsgate, from a small country, go to being such a prized entity?

[Jon Feltheimer]

It's nice to be wanted, but it depends whom you're wanted by.

We got there, I would say, because we created a business plan from the beginning that we followed very strictly, with a lot of discipline. We've grown, but we haven't grown with tremendous spurts. We've grown steadily. We've got a very invested group of employees. The first thing we did when we went over to Lionsgate was we made every employee a shareholder of the company, and to this day, every employee of our company is a shareholder, and they act like that. We empower people to act, to make decisions.

I think we've had a good business plan. I think, frankly, we've executed it well, and obviously we've been a little lucky as well.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

We have a deep history and a rich history of doing film production in this country. Was that the genesis of a company like yours having a good international reputation from such a small nation?

[Jon Feltheimer]

I think that's a very good point. I think Lionsgate had from the very beginning a good reputation. It distributed quality films. As I said, it wasn't really in a position originally to do much production at all; it wasn't in the television business and didn't really have much of a film production business. But I think there's no question that from the very beginning, Lionsgate received awards. We've been nominated for close to 50 Academy Awards and have won of a number of them. So I think that's definitely part of it. We had a good reputation. It was always the pre-eminent, I believe, Canadian film production and distribution business—maybe with one or two competitors.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Ouellet, please.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Thank you, Mr. Chair.

Mr. Feltheimer, if I asked you to show your business card to the committee, the one you have in your pocket right now, what address would we see on it?

[Jon Feltheimer]

I didn't bring a business card, I apologize. But if I did, it would have a Santa Monica, California, address.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

From the outset, you have talked about the profits that your company makes for Canada and Quebec. We have not heard you talk much about cultural profits. It seems to me that a film company makes artistic, heritage and cultural profits. Could you tell us what your company has contributed and what the other company, Icahn, could not contribute culturally?