Alliance Atlantis has rejected two separate bids to buy its troubled subsidiary Motion Picture Distribution, following the July 20 ouster of MPD's chairman Victor Loewy and CEO Patrice Theroux.
Both bidders -- Goldman Sachs and London-based Marwyn Investment Management -- were working with Loewy and Theroux on management buyout offers for MPD, which is Canada's leading indie distrib and also owns Momentum Pictures in the U.K. and Aurum in Spain.
Loewy and Theroux's exits triggered the two would-be buyers to lodge formal takeover bids that would involve the return of the ousted management team.
However, the Alliance Atlantis and MPD boards not only rejected both offers but also did not inform the financial markets about them.
Alliance Atlantis owns 51% of MPD, with the remaining 49% held by Movie Distribution Income Fund, an income trust that was spun off by Alliance Atlantis three years ago and trades on the Toronto Stock Exchange.
Shares of Movie Distribution Income Fund, whose only asset is MPD, closed unchanged Monday at C$5.40 ($4.74), down on the $8 per share before the ouster of Theroux and general counsel Paul Laberge; Loewy resigned.
The bids are understood to value Movie Distribution Income Fund at between $8.93 and $9.82 per share; its IPO price three years ago was $8.93 a share.
Execs at Alliance Atlantis did not respond to calls for comment, but the subject is expected to be a hot topic when senior management discusses second-quarter financial results in a conference call Friday. Movie Distribution Income Fund holds its second-quarter conference call Wednesday.
The silence is prompting astonishment and anger among investors and analysts. They are baffled by the refusal of the company to explain why it fired the execs or to communicate about its contact with potential buyers.
"This is a multibillion-dollar company that has dug a hole and stuck its head in the ground," said one investment source. "It can't continue like this."
Fidelity, one of the biggest shareholders in both Alliance Atlantis and the Movie Distribution Income Fund with a 10% stake in each, wrote a letter of protest in late July demanding the management be reinstated.
Although it's widely assumed the board fired the execs because they were working on buyouts backed either by Goldman Sachs or Marwyn, the board has not confirmed this publicly, and has even denied to investors that it was aware of any management buyout plans. Yet both potential bidders had been doing due diligence on MPD for several months.
The MPD board, which is dominated by Alliance Atlantis execs, has not offered any alternative explanation for getting rid of the top management, despite the fact that only a year ago, it put in place a multimillion-dollar incentive scheme to lock in Loewy, Theroux and Laberge until 2009.
MPD is plugging the gaps in the ranks: Alliance Atlantis exec Jim Sherry has been upped to executive managing director, reporting to new CEO John Bailey.
Meanwhile, it is still unclear whether New Line Cinema, MPD's single biggest movie supplier, will exercise its option to exit from its Canadian output deal following Loewy's exit.
Loewy is the key man in the New Line contract, and he is keen to launch a rival distrib with New Line product. New Line has until Aug. 18 to notify MPD whether it wants to renegotiate its deal.
(Brendan Kelly in Montreal contributed to this report.)
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