“The Last Two Years, Part 2: ‘A Battle Royale Begins!'”

On Friday, May 1st, a lawyer representing Cirque du Soleil sent a formal notice to Québecor, a Canadian diversified media and telecommunications company, asking it to withdraw or correct information it published on one of its media platforms at the end of April. This document criticized the Journal de Montréal in particular for having published an article indicating that Cirque was controlled from a tax haven – “CDS Luxembourg Holdings” – which Cirque denied. Furthermore, the lawyer was adamant that this text was part of a campaign by Québecor aimed at harming the company and its shareholders in the hope of obtaining an “unfair advantage” in the company’s current proceedings, considering Québecor had twice demonstrated in the previous weeks, its interest in acquiring Cirque du Soleil.

According to the formal notice, the “declared objective” was to “hinder [Cirque’s] efforts in its efforts to obtain financial assistance or financing on market terms from the governments of Canada and Quebec in the context of the current crisis.” Cirque said it had “serious reasons” to believe that Québecor, “through its media platforms, [was] currently seeking to undermine the process of maximizing Cirque’s value for the benefit of its stakeholders, including its creditors, lenders and employees, and to exclude interested parties from participating in “the long-term solution” [described by Québecor], all in order to gain an unfair advantage from it.” By ‘unfair advantage’, Cirque meant Québecor sought to thwart the company’s recovery plans to acquire it at a better price. “There is reason to question Québecor’s intentions, as its subsidiaries published no less than five articles on Cirque du Soleil in less than a week, which clearly [aimed] to disparage Cirque du Soleil and its sponsors.”


On May 4th, Québecor took off its gloves, and responded:

The management of [the Cirque] has regrettably decided to make public the proposals it has received from Québecor, which had been sent in confidence to the various stakeholders, including numerous ranks of creditors and shareholders. This move comes at a time when the Cirque faces considerable uncertainty. Indeed, the company itself has raised the possibility of initiating proceedings to place itself under the protection of the Companies’ Creditors Arrangement Act (C-36).

Under the circumstances, Québecor 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 Montréal and all of Québec, and an ambassador for Québec talent on the international stage.

Like all Quebecers, we were surprised to learn of the extent of the Cirque’s difficulties. Though it was known before the current health crisis that the Cirque had problems, there was no reason to suspect they were so serious that the Cirque would be unable to pay its employees and artists, who are the sinews of the company and are now being left stranded. The fact that a business of this size did not have enough cash on hand to cover the essentials is cause for concern, especially in view of the opinion issued by Moody’s, which downgraded the Cirque recently: The company’s financial policy that favors shareholders has increased credit risk, which together with the recent deterioration in performance has resulted in a weaker financial profile.

It was against this backdrop that Québecor decided it wanted to help save the Cirque and would, as a first step, consider extending short-term financing of several tens of millions of dollars to cover payroll for thousands of employees and meet various obligations, such as the outstanding bills of suppliers who have not been paid for months.

In phase two, Québecor would be prepared to inject several hundred million dollars to enable the Cirque to resume its activities and ensure its sustainability. To do so, however, we need access to a detailed analysis of Cirque’s financial position, which we have been unable to obtain to date because our attempts have been rebuffed by Cirque management.

We fail to understand the lack of urgency on the part of Cirque management. With every passing day, the company’s future is being dangerously compromised and its creative forces, which involve thousands of jobs, are suffering significant harm. The time to act is now, before legal proceedings are initiated under the Companies’ Creditors Arrangement Act (C-36). Such proceedings would result in a loss of control and could lead to an outcome that political authorities will regret. If the Cirque goes to the highest bidder, and no other considerations are taken into account, the presence of its head office in Montréal and the associated economic activity could disappear in the medium term, following many other Québec companies that have suffered the same fate.

Québecor wants to secure the future of the Cirque’s activities in Montréal and in Québec, and we have all the assets and expertise required to do so. Québecor is well capitalized and has the substantial financial resources required for the revival of the Cirque. Québecor management will deploy all necessary means to close this sad episode, which is affecting the thousands of artists and cultural workers who are responsible for the Cirque’s success, and ultimately to restore the self-assurance, dynamism and enthusiasm that are part of the Cirque’s DNA.

The time to act is now, before it is too late.

In the meantime, the Cirque received its emergency injection of US $50 million from its three main shareholders in an attempt to keep it afloat. Chairman Mitch Garber said each put in cash equal to their ownership percentages. That would mean TPG ponied up $27.5 million (55%), Fosun $12.5 million (25%) and the Caisse $10 million (20%). “The next phase is likely that the Cirque is going to be seeking additional capital,” Garber said. “It could come in an offer to purchase the Cirque. It could come in the form of an offer to finance the Cirque, and I can confirm to you that the existing shareholders will be among those that want to continue to fund and own the Cirque du Soleil. I would say that everything is on the table (in terms of options), given the uncertainty and the length of time of the uncertainty.”

Garber also said the Cirque wouldn’t allow Québecor executives to see the numbers because Québecor refused to sign a non-disclosure agreement. Garber had been very public in his criticism of Québecor CEO Pierre Karl Péladeau in the past, but sounded a conciliatory note here. “I think my personal feelings about Pierre Karl Péladeau are well known, and I shouldn’t let them enter into a process where I owe a fiduciary duty of governance to a board of directors that has shareholders and creditors,” Garber said. “So, to the extent that Québecor will be a fair player in any process that might come in the not-too-distant future, then I’m going to do my job and govern over that process and look at whatever anyone is going to offer, including Québecor. Of course, I won’t appreciate the process being fought in the newspapers, but we’ll cross that bridge when we come to it.”

But Québecor was not alone among potential Cirque suitors. Lamarre said there were other companies interested in buying Cirque that have signed confidentiality agreements. “There are other parties that are interested, big companies as well,” he said. “So, right now we’re going to go through the process to see all the options that we have ahead of us. … But unfortunately, the reason you’re only hearing about Québecor is because they haven’t signed yet the confidentiality agreement.” Lamarre added, “They didn’t sign it because I think they wanted to get some publicity before they do and that is their strategy, but all the others bidders that are interested that signed the NDA so therefore I cannot unveil their identity.”

But then…


In an opinion piece published in the Montreal Gazette on May 12th titled “Ensuring a bright future for Cirque du Soleil”, Guy Laliberté himself weighed in on the battle…

The paralysis of Cirque du Soleil’s activities due to the pandemic has been making waves, and for me, has triggered a flood of emotions. Even though I’m no longer the company’s owner, I will always be its founder; I have devoted half of my life to Cirque, and its success will always be close to my heart. As we head into a period that could be crucial for Cirque’s future, I have decided to share my thoughts, driven by the desire to protect the Cirque family and to give back after having received so much, in the hope that these reflections will help ensure the best possible future for the company and its stakeholders. The audience’s love for Cirque is the company’s raison-d’être, and few true ambassadors of Quebec culture can pride themselves on shining as Cirque has done throughout the world.

Two months after operations ground to a halt, as Cirque faces the biggest challenge of its existence, we’re about to see a wrestling match involving a number of players. From my point of view, we’re in for a battle royal:

o) At the front of the ring are the current shareholders (TPG, Fosun
and the Caisse de dépôt), led by my friend Mitch Garber, for whom I
have tremendous respect. My heart goes out to them.
o) In the left corner, the debt holders, who took the risk of
financing Cirque.
o) In the right corner, the different levels of government, sitting in
an interesting strategic position, watching the events unfold,
analyzing the situation, and wishing to keep the headquarters and
jobs in Quebec. They want what is best for Cirque … and rightly so!
o) A little further away, some of the major players in the
entertainment industry, both from here and abroad, are weighing the
opportunities. In Cirque, they see the possibility of expanding
their content portfolio and/or securing priority access to Cirque
performances once they can reopen their halls and theatres. But for
the most part, they’re more or less in the same predicament as
Cirque. Will they make our Quebec icon their priority and give all
the love and energy needed to bring it back to life?
o) Standing right beside them are the sharks, who have no knowledge of
the entertainment industry and dream of buying Cirque for a song.
o) And at the very back of the ring are the others … Those who have no
skills or experience in managing cultural organizations of this
scale. Those are the ones who pose the greatest threat to Cirque’s

What is at stake in this fight? What do we want for Cirque? What does the company’s future look like? Does the pandemic provide an opportunity for Cirque to rise from its ashes, like the phoenix?

Cirque is a living organism — with a heart, a soul and a spirit — that lives, grows and recharges through its artists, its audience and its employees. It’s a tightly woven community built little by little, through hard work, commitment and honest relationships. Cirque’s social involvement is an integral part of the pride that artists and employees take in their work, and it’s reflected in the way the public rallies behind its creations. That’s why the discussion should not only take place on the financial level, but on the human level as well. And the nature of the beast should not be underestimated. Cirque has its own personality and ways of reacting. It feeds off the love and support of the audience as well as the creative strength and pride of its artists and employees. Of course, long-term financial viability is necessary for its survival, as well as a good mix of experience and know-how from the veterans, combined with the creative and managerial forces of the future.

It’s clear to me that Cirque’s future will depend on patient investors who will step into the ring and be in for the long haul. Creators will have to be given leeway to reinvent themselves so they can put out shows that touch people and capture the imagination. Investors who want to jump into the ring driven only by the urge to set the wheels in motion again too quickly will have to be avoided at all costs. Patience will lead to victory — that’s my prediction.

You can’t win the Stanley Cup 36 years in a row, but with patience, heart and hard work, you can dream of holding it in your hands once again.

A few days before the registration deadline for the battle royal, I am deciding whether or not I’m going to jump into that wrestling ring.

* * *

A few short weeks later, on the popular Radio-Canada talk show “Tout le monde en parle,” Laliberté announced he was going to jump in that ring. Laliberté stressed he was mounting a bid for Cirque because of his love of what the Cirque does and that money was not the main driving force behind his decision. “It’s finding a perfect balance with a good healthy Cirque financially but also where the love of the public is coming back and mostly where the fire is within the workforce,” Laliberté said. “It doesn’t have to be US$1.5 billion of value to be viable. There will be a very difficult short term and focus on quality is what my focus is versus money. I will jump in if the price is right, but I don’t want to be in an organization where money drives the future of Cirque. That would be very dangerous for the future of Cirque. … I think there’s a bright future for Cirque.”

Guy said he already had several major financial partners lined up to work with him on the bid, but did say it was not mounting the bid with TPG Capital. He also said it was too soon to say whether he would step back in as CEO of the company, or whether he would retain current management, including current CEO Daniel Lamarre. (There had been rumblings of displeasure with the current slate of executives from a number of sources.) “I won’t tell you my recipe because everyone is keeping their plans to themselves,” Laliberté said. “So I won’t disclose my secret sauce. But I can tell you the love factor, the passion factor, the fire factor is what’s always driven Cirque and I wanted to bring it back to where it once was. There’s no right or wrong with what’s been done with Cirque. Under my management we had highs and lows, but the Cirque is a living organism. It’s very emotional and you need to understand it. Cirque feeds from its inner fire and you cannot buy that. Money can’t buy the fire.”

But he admitted it would be tough to relaunch the Cirque. “Don’t get me wrong, it’ll be hell for the first two years and that’s why I took time to reflect on this,” Laliberté said. “Nothing is guaranteed, but I think we’re the best team to make it happen. For sure it’s a jungle out there. It’s complex. But if I’m jumping in, it’s a commitment of 10 to 15 years.”

And what would be even wilder than Guy Laliberté back at the helm? Why, Franco Dragone back as head of creation. “Guy called me two weeks ago, when he decided to jump into the field, to bring Cirque back to what it really is, to see if I was willing to jump with him,” Dragone said. “I said yes. I have been approached by other people over the past month about Cirque, but I think Guy is the one I trust who will bring Cirque back … I could never say no to Guy, because there is such a beautiful history between us.”



Cirque du Soleil Entertainment Group (“Cirque du Soleil,” “Cirque,” or the “Company”) announced [on June 29th] that it and certain of its affiliated companies have filed for protection from creditors under the Companies’ Creditors Arrangement Act (“CCAA”) in order to restructure its capital structure. Its application under the CCAA will be heard tomorrow by the Superior Court of Québec (Commercial Division) (the “Court”). If the Court grants the initial order sought, the Company will seek its immediate provisional recognition in the United States under Chapter 15 of the US Bankruptcy Code in the United States Bankruptcy Court.

In connection with the filing, Cirque du Soleil announced that it has entered into a “stalking horse” purchase agreement (“Purchase Agreement”) with its existing shareholders TPG, Fosun, and Caisse de dépôt et placement du Québec (the “Sponsors”) as well as Investissement Québec as a debt provider, pursuant to which the Sponsors would acquire substantially all of the Company’s assets, for a combination of cash, debt, and equity, and would establish two funds totaling US$20 million to provide additional relief to impacted employees and independent contractors. Subject to the Court’s approval, the Purchase Agreement will serve as the “stalking horse” bid in a sale and investment solicitation process (“SISP”) supervised by the Court and the monitor, who will be appointed by the Court. The Purchase Agreement sets the floor, or minimum acceptable bid, for an auction of the Company under the Court’s supervision pursuant to the SISP, which is designed to achieve the highest value available or otherwise best offer for the Company and its stakeholders.

Under the terms of the proposed Purchase Agreement, the Sponsors will inject US$300 million of liquidity into the restructured business to support a successful restart, provide relief for Cirque du Soleil’s affected employees and partners, and assume certain of the Company’s outstanding liabilities, including with respect to ticketholders affected by the cancellation of the shows. As part of this US$300 million, Investissement Québec will provide US$200 million in debt financing to support the proposed acquisition. The Purchase Agreement provides Cirque du Soleil’s existing secured creditors with US$50 million of unsecured, takeback debt in addition to a 45 percent equity stake in the restructured Company, and repayment of an interim loan made by certain first lien lenders in an amount of US$50 million. The proposed Purchase Agreement further provides, as part of the US$300 million of liquidity, for the creation of a dedicated US$15 million employee fund to provide financial assistance to terminated employees, and a dedicated US$5 million contractor fund to pay outstanding Company obligations to artisans and freelance artists. It also includes key undertakings for the Québec community in which Cirque du Soleil has deep roots, such as maintaining Montréal, Quebec, as the businesses’ headquarters, with a view to keeping the core of this important cultural asset in Quebec.

Cirque’s Transaction Committee, which was put in place by the Board to carry out a fair and an independent process with the assistance of the Company’s advisors, is encouraged by the high level of interest that Cirque du Soleil has generated from potential investors during this phase of the SISP. After evaluating the proposals received in the SISP’s first phase, the Transaction Committee recommended, and the Board of Directors approved (with the representatives of the existing shareholders and Sponsors abstaining from voting), the Purchase Agreement as being in the best interest of all stakeholders, including its employees and creators.

Among other things, the Purchase Agreement contemplates a lower level of post-restructuring debt relative to other bids, has no break fee associated with it and was the only bid to provide dedicated employee and contractor funds together with meaningful assumption of liabilities and significant commitments to Quebec operations. The Sponsors’ bid was notably the sole fully documented and binding bid received, allowing the Company to meaningfully advance toward an eventual restart by launching the in-court process immediately. The Transaction Committee and the Board of Directors also believe that a transaction with the Sponsors will serve to ensure the Company’s sustainability, as the Board of Directors seeks to deal seriously and thoughtfully with the high level of uncertainty facing the Company before it can re-launch its business operations at scale.

“For the past 36 years, Cirque du Soleil has been a highly successful and profitable organization. However, with zero revenues since the forced closure of all of our shows due to COVID-19, management had to act decisively to protect the Company’s future,” said Daniel Lamarre, President and CEO of Cirque du Soleil Entertainment Group. “The Purchase Agreement and SISP provide a path for Cirque to emerge from CCAA protection as a stronger Company. The robust commitment from the Sponsors – which includes additional funds to support our impacted employees, contractors and critical partners, all of whom are important to Cirque’s return – reflects our mutual belief in the power and long-term potential of our brand. I look forward to rebuilding our operations and coming together to once again create the magical spectacle that is Cirque du Soleil for our millions of fans worldwide.”

As a necessary part of its restructuring and eventual plans to restart operations, Cirque du Soleil announced critical steps related to employees, including the termination of employment of approximately 3,480 employees previously furloughed in March following the halt in revenue caused by the government-mandated shutdowns in response to the COVID-19 pandemic. This termination allows employees to maximize and accelerate the financial compensation that they can obtain by immediately receiving payment on account of all accrued vacation time and gaining access to the Canadian federal Wage Earners Protection Program and other unemployment assistance programs. The Sponsors’ bid and related restart plan includes a number of considerations for employees, including the creation of $15 million in assistance funds for those whose employment has been terminated and the intent to rehire a substantial majority of terminated employees, business conditions allowing, once and as mandatory shutdowns are lifted and operations can resume. Given resident shows in Las Vegas and Orlando are expected to resume before the rest of the Company’s shows, the artists and show staff of the Resident Shows Division are not affected by this measure to allow for a swift and efficient return as soon as the ban on gatherings is lifted and show operations can resume.

As part of its solicitation of proposals in its sale process, the Company asked that the potential bidders to specify their intentions with regard to Cirque’s terminated employees, including financial compensation for these employees, the maintaining of the operations in Quebec, and a clear path to rebuilding operations, all of which have been and will continue to be material considerations of the Company taken into account as part of the SISP.

The fight, however, was far from over.


Cirque’s creditors were upset, to put it mildly, at the company’s restructuring plan as announced. The lenders who held most of Cirque’s nearly $1 billion million debt were not accepting a bid by the company to seek bankruptcy protection. Under Cirque’s restructuring proposal, TPG Capital, China-based Fosun Capital Group and the Caisse de dépôt et placement du Québec offered to purchase and restart the company for $400 million. They would thus have a 55-percent stake in the company. In this plan, lenders would be paid pennies on the dollar for what they were owed. Furthermore, these very same lenders had, on June 8th, days before Cirque’s restructuring announcement, proposed to inject $300 million into the Cirque du Soleil under a bankruptcy restructuring plan that would also convert the company’s debt into a 100% ownership stake. They would also rehire nearly 95% of the company’s payroll and maintain the company’s headquarters in Montreal. The TPG proposal left those furloughed twisting in the wind.

The creditors included Canada-based Catalyst Capital, as well as US investment firms Shenkman Capital, Providence Equity’s Benefit Street Partners and CBAM. (The latter is controlled by Eldridge Industries, which owns more than 20 percent of the Los Angeles Dodgers, as well as Dick Clark Productions, The Hollywood Reporter, and film distributor A24.) The group thought that current Cirque management was taking the offer seriously. But instead, Lamarre and the Cirque board of directors blindsided the creditors group, filing for bankruptcy protection in Quebec Superior Court and proposed a plan that would protect the stake of the three current owners. Lamarre’s deal included permanently firing 3,480 employees and using US$200 million from the Quebec government from a loan already promised by Economy Minister Pierre Fitzgibbon.

“Ours is a constructive proposal focused on preserving all employees, providing more money than was presented … and (we will be) achieving this while preserving the company in Quebec without having to use any taxpayers’ money,” said Gabriel de Alba, managing director at the Toronto-based private equity firm Catalyst Capital Group.

In its bankruptcy filing and in his public comments in weeks prior, Lamarre had blamed all of the Cirque’s financial woes on the COVID-19 pandemic, but court documents underline that there had been big financial issues for years. Net losses at the company increased from US$10 million to US$80 million between 2017 and 2019. Sources close to the creditors group said the losses began piling up shortly after Guy Laliberté sold the circus to TPG in 2015. The debt increased from around US$300 million to US$1.2 billion over those five years. “The leverage on the organization was immense, but the profitability went nowhere,” a source said. “They were already in trouble (before COVID). They were already starting to stretch out their accounts payable as early as last August. They were deciding not to pay people.”

At the time of the restructuring announcement on June 29th, there were reportedly six bids to acquire the Cirque. Who would win out?