CanWest puts Fireworks on the block
CanWest Global says it wants out of international production and will soon offload its challenged subsidiary Fireworks Entertainment, producer of Canadian-content action-adventure series including Mutant X and Gene Roddenberry’s Andromeda. The media company says it will, however, continue to produce programs for the domestic market.
‘We’ll still be involved in production, but it will have to fit our Canadian program schedule,’ says CWG CFO John Maguire, following the divestiture announcement April 16.
Winnipeg-based CWG, which took action after Toronto-based Fireworks failed an internal review in the wake of ‘continued and persistent weakness in demand for North American content in international markets,’ will also record a $200-million write-down on its program and production division in its second quarter report (ended Feb. 29). That quarterly report was due out after Playback’s press deadline.
According to CWG, Fireworks has taken a number of steps over the past year – including the closure and outsourcing of its theatrical film development, production, acquisition and distribution activities and staff reductions – to reduce its financial exposure in the face of declining demand in international markets for its product.
‘It has become clear that sound business principles could no longer justify the Fireworks business model,’ says Leonard Asper, CWG’s president and CEO, in a statement. ‘We believe that this action should contribute positively in future to the company’s improved free cash flow and further debt reduction. Global Television will continue to be active in support of Canadian production, including high quality series such as [Zoe Busiek:] Wild Card and Strange Days at Blake Holsey High,’ both produced by Fireworks,.
CanWest paid $40 million to acquire Fireworks in 1998. However, Maguire refused to say what the sticker price of Fireworks’ film and television library and distribution operation is today. Investment banking firm Salem Partners of Los Angeles has been hired to broker a deal ‘as soon as possible.’
The Fireworks sale echoes the steps taken last year by Alliance Atlantis to abandon production of MOWs, miniseries and features – except for its money-making television franchise CSI.
‘We didn’t take our lead from them,’ says Maguire, referring to the AAC business change. ‘We’re all in the same boat, facing the same issues.’
International sales of programs like Relic Hunter are soft, he explains, and Andromeda has yet to sell into some markets.
Top-performing CanWest Global shows include the U.S.-sourced series The Apprentice and Survivor. The network recently announced the cancellation of its primetime Canadian series Blue Murder. Some Fireworks productions, while created for a more international audience, were CRTC-certified and fulfilled CanWest Global’s Canadian-content requirements at home.
The fate of Fireworks’ production slate – which had been halved to $50 million in value in 2004 – will be up to the new owner, says Maguire.
Trading in CanWest Global’s A-class shares on the Toronto Exchange was in the $11 per share range on April 19. The year low for the stock was $7.25 per share, while the year high was $14.27 per share.
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