It's too soon to make a judgment on the likely outcome of Aubrey Dan's attempt to win control of Toronto's Canon and Panasonic theatres. But a sober morning-after analysis of his application for an Ontario Superior Court injunction this week to block their sale to his rival David Mirvish by Key Brand Entertainment, a company in which Dan is a minority shareholder, suggests that he faces an uphill battle.
The Mirvish family - David long worked alongside his late father, Ed - has dominated the theatrical scene in Toronto for decades. Since the demise of Garth Drabinsky's Livent empire in 1998, Dan is the first comer to pose any serious challenge to Mirvish.
There are two essential planks in Dan's argument. The first derives from his $5-million investment, and a letter of credit for another $7.5-million, in John Gore's Key Brand. The 12.5-per-cent stake was acquired with the hope and clear expectation that it would ultimately give him control of the two theatres. It's not impossible for a presenter to make money without ownership of a jewel like the 2,300-seat Canon (née Pantages), but it's a lot easier with it. The refurbished 700-seat Panasonic would have been a huge bonus.
In 2007, as he prepared for his first season as a full-fledged impresario, Dan had already tried to buy the theatres from their previous owner, Live Nation, which was divesting its entire theatrical division. But Live Nation refused to hive off its basket of properties. Gore's arrival on the scene must therefore have seemed like a godsend, giving Dan access to the venues at a much cheaper cost.
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According to Dan's statement of claim, Gore and Key Brand effectively promised him his dream. They discussed what Dan calls a "term-sheet agreement," stipulating (among other things) that Dan's theatrical arm, Dancap Productions, would manage all of Key Brand's Canadian assets, including the Canon and Panasonic, as well as Broadway Across Canada, a company that produced touring shows in Canadian cities. Dan would become CEO - displacing Ronald Andrew. Andrew would stay on in a diminished capacity, needed for his expertise in running shows and his vast network of contacts. The two men have yet to meet.
But it's not clear whether the term-sheet agreement was ever finalized, or whether any such document was submitted this week as part of the Dancap filings. These have been sealed pending a court ruling on the bid for an injunction, expected early next week. It appears possible that the term-sheet talking points constituted Dancap's wish list.
When Key Brand responded with a proposal that would have given it the right to terminate Dancap's management role and to sell the theatres, Dan refused to sign. That prompted Key Brand to bring an action in a California court to compel arbitration. The issue is so far unresolved.
So a great deal rests on the nature of Key Brand's undertakings to Dan. What did they actually promise him, and did they put it in writing?
The second dubious arrow in Dan's quiver is the Mirvish lease on the building. It was originally signed in September, 2001, for a period of 10 years; and was amended in 2004, with another five years added. Initially, the Canon had been owned by SFX Entertainnment, which had salvaged it from the carnage of Livent. SFX brought in a stream of touring shows; almost all of them lost money, and eventually SFX approached Mirvish and asked him to take over the theatre's management.
The lease agreement, which carries the word "lease" on its first page - a potential problem for Dan - runs only a few pages. It gave Mirvish responsibility for the venue's day-to-day operations, made him its primary programmer and, perhaps most significantly, barred SFX from competing with Mirvish Productions by importing Broadway, West End or international shows into the Toronto market.
In the seven years since then, during which ownership of the theatre passed first to Clear Channel, then to Live Nation and, as of last Jan. 24, to Gore's Key Brand, all programming decisions for the Canon were made by the Mirvish organization. Indeed, none of the various owners even suggested a single show.
Dan's statement of claim maintains that what Mirvish had was not a legal lease, just a licence to present shows, and that SFX and its successor companies retained the right to make final programming decisions. If Dan's claim is accurate, then that right would have ultimately passed to Key Brand and, one might assume, to Dancap, in its alleged capacity as the Canon's landlord.
But the wording of the lease appears to state clearly that Mirvish would have "primary" responsibility for programming; that, in lieu of rent, he would share all revenues with SFX (and its successor companies); and that in the event of a disagreement over programming, the matter would be "mutually resolved."
The lease further granted Mirvish a "first right of negotiation" to acquire the building if it were put on the market. From Gore's point of view, the two Toronto properties were something of a deadweight, since he couldn't use either to mount shows he was otherwise taking across the country. Indeed, Gore is said to have realized early on that his best recourse was to sell them, and is thought to have pledged to do so in order to secure financing for his $60-million acquisition of the Live Nation assets.
And in selling them, he was legally forced to offer them first to Mirvish - not Dan.
With the $35-million he hopes to receive from Mirvish if the Canon/Panasonic deal closes, Gore will have struck quite a tidy bargain, since the Live Nation properties include several pieces of prime U.S. real estate, as well as the Broadway Across America company. Unless the court grants his injunction and blocks the sale, the sale to Mirvish will close June 5.
So where would that leave the ambitious impresario? Not amused, to be sure. Dan's got a Broadway hit, Jersey Boys, opening at the Toronto Centre for the Arts in North York in August, and it could run, in theory, for a long time. And he has occasional access to the Elgin and Winter Garden theatres downtown, where he earlier staged The 25th Annual Putnam County Spelling Bee and The Drowsy Chaperone. But his relationship with Gore has plainly run amok and will have to be legally unravelled. And he won't likely have access to whatever shows Gore develops or acquires.
Ironically, although Mirvish and Dan have yet to meet for a professional chat, the Mirvish organization did approach Dan two years ago, inviting him to invest in We Will Rock You or to become an occasional tenant in their theatres with his own shows. He declined, saying he had reservations about the strength of the We Will Rock You script, and that, in any case, he wanted to do his own thing in North York.
We Will Rock You has run for 61 weeks at the Canon, and will move to the more intimate Panasonic in July (where its writer, Ben Elton, says the audience will be so close to the performers that they'll practically be able to see down their vocal cords). There, it may run for another year or more.
Aubrey Dan's decision to decline David Mirvish's offer of peaceful co-existence may be one he comes to regret.
