Birth of a powerhouse

JOE CHIDLEY August 3 1998

Birth of a powerhouse

JOE CHIDLEY August 3 1998

Birth of a powerhouse



They stopped short of calling him crazy— around the glitzy Toronto offices of Alliance Communications Corp., you don’t call Robert Lantos that and expect to get away with it. But when the board of directors found out last spring that Lantos was negotiating a merger with Atlantis Communications Inc., longtime No. 2 in the production industry, with a view towards stepping down as chairman and CEO, some of them suggested that it was just a phase he was going through. “They said things like,

‘Are you feeling all right?’ ” Lantos, 49, recalls, puffing on a cigar and fiddling with his plastic lighter. “People tried to tell me this is normal when you’re approaching 50, everyone goes through it, don’t do anything foolish.” At the urging of a friend,

Lantos took a month to think about his plans. But he came back more certain than ever that the merger—in which Lantos will hand over the management reins to Atlantis CEO Michael MacMillan—was the right thing both for the company and for himself.

Because what Robert Lantos really wants to do, he says now, is make movies—not acquire companies or negotiate distribution deals, or get named as honorary director of such and such a charity, or fulfil any of the other responsibilities that go with his unofficial title as king of film and TV production in Canada. In fact, the 12 years he has spent as head of Alliance—during which he built the company into the largest of its kind in the country, with 1997 revenues of nearly $400 million—he describes as “a detour” from his artistic goals.

And the deal with Atlantis? Good business, sure, Lantos says, but it is mainly a means to satisfy a long-held goal to get out of empire-building and back to his first love.

“This is a selfish act, what I’m doing,” he explains. “I’m doing this strictly for myself.”

But if the merger is the child of selfishness, it is bound to have ramifications beyond Lantos himself. It began last October, during a chance meeting between Lantos and Peter Sussman, president of Atlantis’s Los Angeles operations, in an elevator at the Carlton Hotel in Cannes during an industry convention. Their talk ended on the terrace bar hours later, Lantos recalls. “That was the first serious conversation I had with the Atlantis peo-

ple,” he says. Months of difficult—and secretive—negotiations followed, during which the principals adopted code names in business correspondence—Lantos was Pluto, MacMillan Venus.

The result is a complex deal—in essence a reverse takeover, with two Atlantis shares being traded for every Alliance share, meaning that Alliance shareholders will still hold 60 per cent of the new company’s stock. In exchange, MacMillan be comes the chairman and CEO, supported largely by his own management team, including Sussman and Atlantis co-founder Seaton McLean. Alliance co-founder Victor Loewy will remain head of film distribution. Under exclusive contract to the new entity, Alliance Atlantis Communications Inc., for three years, Lantos will have no management role, and will be limited to overseeing two new TV series— Power Play for CTV and Cover Me for CBC—and producing films. He has at least seven projects in the works, with financing guaranteed by Alliance Atlantis but controlled by him. They include The Taste of Sunshine, starring Ralph Fiennes and directed by Hungarian Istvan Szabo (Mephisto, Colonel Redl)', David Cronenberg’s eXistenZ, a $31-million sci-fi thriller now in post-production; and Denys Arcand’s 15 Moments, an “extended contemplation on beauty,” Lantos says.

Alliance plus Atlantis equals film-TV clout

In the wake of the merger announcement, some industry observers questioned Lantos’s motives, pointing out that as a 43-percent shareholder in Alliance, he stands to reap as much as $50 million from the deal, maybe more. But whether the proposed corporate coupling is the result of love or money, it will create a formidable player on the North American entertainment scene. If approved by shareholders, the new company will have market capitalization of more than $700 million and projected revenues for 19981999 topping $750 million. Compared with U.S. giants like Disney or Time-Warner Inc.—which earn more than 15 times that figure in six months—the new entity is small fry. But it will still be among the 12 largest entertainment companies in the world on the basis of revenues. “It’s just such an obvious thing to do, combining these two companies,” says MacMillan, who notes that while Alliance concentrated on feature films, Atlantis has stuck to series and movies for TV. “And by putting them together, the extra strength it will give us internationally—to support the Canadian productions we’re undertaking—is huge.”

Despite their similarities, however, the two corporate cultures are different—a reflection, in part, of the personalities of Lantos and MacMillan. Hungarian-born Lantos got his start, along with friend Loewy, by distributing porn: his first purchase was The Best of the New York Erotic Film Festival back in 1972. Scarborough, Ont.born MacMillan founded Atlantis 20 years ago with fellow film-studies grads from Queen’s University, including McLean and Janice Platt, and their first projects were adaptations of Canadian short stories (Boys and Girls, their 1983 version of a story by Alice Munro, won an Oscar). And the two CEOs have clearly different styles of running their respective companies. Lantos (who took home $1.59 million last year) is renowned for his hands-on— some say dictatorial—approach.

MacMillan (who earned a mere $407,000) is more collegial. “He is very good at delegating responsibility,” says McLean. “And his door is always open—maybe to a fault.” MacMillan is clear about which management style is going to hold sway at the new company. “I intend to carry on doing things exactly as I always have,” he says.

That business, MacMillan says, will have less and less to do with producing series and films in-house, and more with entering into distribution and international deals with independent producers and film-makers—a major-studio style that both companies have been evolving towards in recent years. Still, Alliance Atlantis will have long arms in TV production (with Traders and Earth: Final Conflict among Atlantis’s series, Black Harbour from Alliance) and

distribution (enhanced by Alliance’s May purchase of a 75-per-cent interest in Cineplex Odeon Films, one of the country’s biggest film distributors). Alliance Atlantis will also control four specialty TV channels—Life and Home & Garden Television from Atlantis, Showcase and History from Alliance—and will have nine applications for new channels before the CRTC early next year.

Stock-market analysts were quick to applaud the merger. Separately, both companies had been performing well; Alliance’s net earnings rose to $24.3 million in 1997-1998 from $18.2 million, while Atlantis’s were up 65 per cent, to $5.6 million, in the same pe-

riod. Now, the two companies estimate savings through combining operations will reach $20 million annually. “Both companies were successful before,” says Yorkton Securities analyst Roger Dent. “But this takes them up to the highest level of the independent production industry.” Reactions among many TV and film producers, however, were mixed. For some whose budgets are measured in the tens of thousands rather than tens of millions, the Alliance Atlantis mega-company is a frightening prospect. Another factor: unlike Lantos, who nurtured such film talents as Cronenberg, Atom Egoyan and Patricia Rozema, the Atlantis management team has little experience in the feature film business. “Alliance was certainly the biggest company for us in terms of its support for feature films,” says Anna Stratton, whose Triptych Media Inc. produced The Hanging Garden and Lilies with Lantos’s company. “But for us now it’s a question: will that commitment still be there? Will there be a place for feature films—or are we really moving towards television?” McLean, the Atlantis alumnus who will head the new company’s domestic production, says he envisions working with—not swallowing up—the small to mid-sized production companies on which he will depend for material, both in film and in television. ‘We haven’t been assholes in the past,” he says matter-of-factly. ‘We’re not going to start being assholes now.” Lantos, meanwhile, is preparing to relinquish power. Asked how he will feel when—as is in-

evitable—MacMillan and friends do something he disagrees with, he takes a long puff on his cigar and leans over his desk. “Sure, there are going to be things I’m not going to like,” he says after a pause. “They might let the Japanese garden I built die”—he waves towards a little patch of greenery on the 15th-floor balcony outside his office’s sliding doors. “But I’m resigned to all that. There are more important things in life.” Like making movies. “Financing and distribution—that’s what I’ve built,” Lantos says with a hint of a grin. “Now I want to produce and let the company finance what I produce.” Crazy? Maybe—like a fox.