Guy Laliberté, founder of Cirque du Soleil, is the world's leading expert at selling expensive tickets to acrobatic spectacles. By way of demonstrating that, the former street performer has managed to sell control of his circus company for $1.5-billion, a sum that seems rather rich for a business that has had its share of recent pratfalls.
The price implies that the Cirque is roughly equal in value to a mid-tier National Football League franchise, such as the Atlanta Falcons or Kansas City Chiefs – at least, according to the estimated price tags that Forbes magazine puts on those pigskin empires.
The price also indicates the circus is worth about as much as the average Major League Baseball franchise, which Forbes calculates as around $1.2-billion (U.S.).
Do those relative valuations make sense? Put it this way: Both NFL and MLB teams are entrenched monopolies, with predictable, recurring ticket revenues and surging income from television. The Cirque, for all its undeniable virtues, doesn't possess any of those selling points.
In an interview with The Wall Street Journal last year, Mr. Laliberté acknowledged that the privately held company lost money in 2012 on revenue of $1-billion. In response, the Cirque laid off 400 people, trimmed about $100-million in costs and returned to profit in 2013 on revenue of $850-million. Company sources say that revenue now stands at around $1-billion and that the Cirque is back to churning out profit.
But at the very least, the rough patch demonstrates that the Cirque's grasp of what audiences want is far from guaranteed. Between 2007 and 2013, the Cirque opened 14 shows, five of which flopped and closed early, according to The Journal. The high rate of misses raises the possibility that the Cirque's core market is close to saturation.
To be sure, optimists can point to exciting new expansion possibilities. One of the new buyers, Fosun Capital Group, is a Shanghai-based fund manager that plans to help the Cirque grow in China. The other major investor, TPG Capital LLP of the U.S., is a private-equity firm with interests in broadcaster Univision Communications Inc., which could open up new opportunities for the Cirque in North America.
However, given the volatility of the past few years, a strong dose of caution is warranted. Mr. Laliberté sold 20 per cent of the Cirque to a Dubai-based group in 2008 at a price that valued the entire company at $2.7-billion, according to The Journal. The new valuation appears to be just over half the figure implied in the Dubai deal. (Mr. Laliberté later took back a portion of the Dubai stake and the remainder is to be sold to the new buyers.)
No doubt the lower valuation reflects many things, but it suggests that investors have understandable concerns about the company's business model. Pouring large amounts of development money into spectacular shows that may or may not attract an audience is inherently a high-risk venture.
Mr. Laliberté, who was the first Canadian space tourist and likes to relax by playing high-stakes poker, always revelled in that risk. But it's by no means certain that a company that depends upon making big bets on subtle matters of aesthetics can thrive under a new divided ownership structure.
Mr. Laliberté will sell 60 per cent of his stake to TPG, while 20 per cent of the company goes to Fosun, and the Caisse de dépôt et placement du Québec, the pension fund, takes 10 per cent. He will keep 10 per cent through his family trust.
To make the deal pay, the new buyers will have to take the Cirque to new heights. Given fickle public tastes and a crowded entertainment market, that's a task will require as much daring and flexibility as any act in the Cirque.