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Report on Business Cirque du Soleil readying for initial public offering as early as next year

Cirque du Soleil is making plans for a possible IPO as early as next year as the storied live-entertainment company pushes ahead with a global expansion strategy.

Montreal-based Cirque is laying the groundwork for an initial public offering during the first half of 2020, said a person familiar with the plans. The company has not made a decision to proceed and it is preparing documentation now just to have that option, said the person, to whom The Globe and Mail granted anonymity because they were not authorized to speak to the media on the matter.

Cirque won’t necessarily follow through if market conditions are not favourable and plans are not advanced to the point where Cirque has hired any advisers, the person said.

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TPG Capital, a Texas-based private-equity fund, controls Cirque after buying a roughly 55-per-cent interest in the company from founder Guy Laliberté in 2015. Chinese fund manager Fosun Capital Group bought about 25 per cent and pension fund manager Caisse de dépôt et placement du Québec took 10 per cent in a deal estimated to be worth $1.5-billion. Mr. Laliberté kept 10 per cent.

Going public would give the Cirque greater financial flexibility as it moves ahead with an ambitious acquisition strategy steered by chief executive Daniel Lamarre, who is trying to reshape the company’s capabilities beyond the circus arts to other live-entertainment content.

Over the past two years alone, Cirque has purchased The Works Entertainment, the production company known for The Illusionists franchise, as well as Blue Man Group and VStar Entertainment Group, which is best known for its children’s shows, PAW Patrol Live. Cirque is also stretching further geographically, opening its first resident circus show in China later this year and developing lower-budget shows specifically for emerging markets such as India.

A possible IPO “seems like the logical next step,” said Patrick Leroux, a professor at Concordia University who has written on the circus industry, adding the move will bring in new capital and ideas as the company accelerates growth. “It seems like now they’re about to enter into an extremely productive period. Creating new shows, new ventures; opening up to different models of entertainment.”

But that growth has not come without risk. Moody’s Investors Service says the company’s largely debt-funded expansion strategy could be unsustainable, resulting in financial strain on its core operations. Cirque posted revenue of US$832-million for the 12 months ending Sept. 30, 2018, and it remains heavily leveraged, with a debt-to-EBITDA ratio (earnings before interest, taxes, depreciation and amortization) expected to remain above seven through 2019, the credit company said in a report published in February.

Mr. Lamarre has said he wants to do one acquisition a year, depending on available targets. A journalist before entering the business world, he has led Cirque’s operations for nearly two decades.

A public listing for Cirque would also offer an opportunity for the existing shareholders to take some money off the table.

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It remains unclear what percentage of capital Cirque intends to make available, although it is not unusual for companies held by private-equity players to float minority stakes of between 25 to 30 per cent of the overall ownership position in an initial sale. The remaining position is often sold off in subsequent secondary offerings.

A spokesperson for Cirque did not respond to a request for comment. A spokesperson for Mr. Laliberté said he declined to comment. TPG and the Caisse both declined to comment.

With an IPO, Cirque would buck the trend of Quebec companies snubbing the public markets in recent years. The situation has become so acute that a blue-ribbon panel of experts was convened in 2016 to recommend solutions to reverse the tide, including offering special tax breaks and incentives to companies weighing public listings.

“Things have not changed at all" since then, said Claude Désy, a tax and securities lawyer with Dunton Rainville, who launched the panel. Among the notable exceptions to the trend is Montreal-based software maker Lightspeed POS Inc., whose shares continue to surge following a public listing in March.

Cirque was founded in 1984. It currently employs 4,500 people.

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