Call it Cirque Lite.

Quebecor Inc. executives are reaching out to institutional investors this week to make the business case for taking over the Cirque du Soleil, a deal with a public profile that far exceeds its potential financial impact. While the two iconic Quebec companies have personal conflicts – Cirque chair Mitch Garber took pot shots at Quebecor chief executive officer Pierre Karl Péladeau in the past – the Montreal-based telecom company is taking pains to explain a global entertainment brand is up for grabs at a bargain price.

The Cirque has well-documented problems. Under private equity ownership – Texas-based TPG Capital owns a 55-per-cent stake – the company loaded up on debt and launched an ambitious slate of 44 shows. The pandemic brought the curtain down, and cash stopped rolling in. The Cirque laid off 4,700 employees in March, and Mr. Garber is openly discussing bankruptcy proceedings as one way to fix the balance sheet – the company owes US$900-million, and credit rating agency Moody’s said recently there is a high risk of default.

Mr. Péladeau is offering a made-in-Quebec financial solution to the Cirque’s woes that plays to the province’s justified pride in a billion-dollar business founded by street performers on stilts. According to Quebecor chief financial officer Hugues Simard, the plan starts with scaling back 13 Cirque travelling shows that play in arenas or under massive tents, and 21 productions mounted under affiliated brands, such as Blue Man Group. The shows break even at the best of times, according to Quebecor, and these clearly are not the best of times.

If Quebecor was calling the shots, the focus would be on maximizing revenues from six existing Cirque shows in Las Vegas once the gambling mecca reopens, along with four similar permanent productions anchored in entertainment destinations in China, Mexico, Germany and a planned venue in Orlando, Fla. As the dominant provincial broadcaster, Quebecor sees the potential to boost Cirque revenues by televising and streaming its shows.

Quebecor brass know that institutional investors and analysts will be skeptical about any transaction in which money is spent on anything other than telecom gear. The company wants to dispel any notion that Mr. Péladeau has decided to run off and join the circus.

The Quebecor business argument starts with the fact that the telecom company already successfully blends content from TV stations with distribution through cable and cell phones. The COVID-19 crisis has given Quebecor an opportunity to add premium content during a fire sale. Cirque founder Guy Laliberté sold control in 2015 for US$1.5-billion. In a press release on Monday, Quebecor talked about an initial investment that would amount to only tens of millions of dollars, money earmarked for paying laid off employees, then injecting “several hundred million dollars to enable the Cirque to resume its activities and ensure its sustainability.”

While the company is telling the Street a takeover makes business sense, to win in the court of public opinion, Mr. Péladeau is all but wrapping himself in Quebec’s Fleurdelisé flag. Monday’s press release explained the company decided to go public with its plans after its target leaked details. “Quebecor has no choice but to publicly clarify its desire and determination to help save the Cirque, a creative powerhouse which is an economic engine for Montreal and all of Quebec, and an ambassador for Quebec talent on the international stage,” the release said.

Along with the Texas private equity fund, the Cirque is currently owned by Chinese fund manager Fosun Capital Group, which holds 25 per cent. The other major shareholder is the Caisse de dépôt et placement du Québec, with a 20-per-cent stake and a potential kingmaker role. There’s a long history of the home team coming out on top in Quebec takeovers, and Quebecor wants to see history repeated in the restructuring of the Cirque.

The Globe and Mail, May 7, 2020