Potential IMAX sale subject to foreign investment rules says Canadian Heritage

Any potential sale of Imax Corp to a foreign company won’t go ahead without the approval of the foreign investment branch of Canadian Heritage, says the country’s top review official. The Toronto company announced July 13 that it was looking at "strategic alternatives" including the sale or merger of the company in an effort to bolster its languishing stock price. Imax is still considered a Canadian success story, even though it was sold in 1994 to Wasserstein Perella, a NYC capital company. It’s also viewed by the federal government as a Canadian cultural industry, says Carla Curran, director of foreign investment at Heritage. The sale of foreign-controlled Canadian companies in the business of distributing films is prohibited without a notice of application or review, and it’s likely any future owner of Imax will have to offer up public benefits as part of any deal. Imax was originally founded as an outgrowth of National Film Board experimental film techniques with multiple cameras in the 60s. Today, the company and its subsidiaries focus on film and digital imaging technologies, including giant-screen images, 3D presentations, digital post-production and digital productions. Besides producing large-screen movies for more than 210 Imax theatres operating globally, the company also licenses its technology to new theatres and distributes films. According to Canada’s foreign investment guidelines, under the Investment Canada Act, 1985, any foreign investment in a cultural industry is reviewed. Foreign takeovers of foreign owned-firms are allowed only when investors agree to invest a portion of their Canadian earnings in developing Canadian culture. Curran told CNM that the original takeover in 1994 was reviewed, though its undertakings are confidential as per the review process. She was not able to say why the firm was allowed to be bought by an American company when rules clearly prohibit such sales. The official in charge of that process, Industry Canada’s Peter Claskey, has retired and was unable to be reached for comment. In July 1999, responsibility for foreign investment review of cultural industries was transferred from Industry Canada to Heritage. "Our take on this is that if such a company has activities in Canada – whether it’s Canadian-owned and -controlled, or foreign-owned and -controlled – if they have activities in Canada, and this is a sector considered a cultural industry, it has to be reviewed," says Jean-Francois Bernier, director of film, video and sound recording policies and programs at the department. If Imax is sold, and observers say Vivendi, Sony and Disney are likely suitors, the company will have to notify Canadian Heritage which will then decide if a review is necessary, says Curran. If that goes ahead, there would likely be a process of a few months as government officials and the new owners negotiate. Curran would not say what potential outcomes could arise from a review of a future Imax sale. Bernier says possible undertakings might include contributions to training, content development or sponsorship of events which develop Canadian content. For example, he says a new group of Canadian Imax producers being formed in Montreal want the ability to develop films in Montreal. He adds that any undertakings sought by the department as a condition of approval will be in keeping with the size of the distribution business. Cathy Styponias, an analyst tracking Imax for Prudential in NYC, says putting the company on the selling block reflects some frustration by management about the stock’s undervalued status. "I would have expected (Imax) to pursue this alternative, but not for a couple of years – and at higher levels," she says. "To some degree, there is frustration by the management at the current stock price level, and I think that’s speeded up the timetable."

Potential IMAX sale subject to foreign investment rules says Canadian Heritage

News | 07/26/2000 4:00 am EDT

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