After it became clear the business plan at Continent 8 was changing, the Mohawk Council of Kahnawake and Tewatohnhi’saktha decided to sell and move on, to the tune of $35 million USD. (Kacim Steets, The Eastern Door)
[apss_share]
Some relationships last for all time, and some face a point in time where the two parties must part ways.
For the Mohawk Council of Kahnawake and Tewatohnhi’saktha, it became apparent last year that the two organizations’ engagement with Continent 8 Technologies would need to end, after a decade together.
“It became obvious over the course of time that at some point this was going to happen,” said council grand chief Joe Norton at a joint news conference Monday.
“C8 was on its way into other fields and areas and the MCK felt that it wasn’t necessarily the field that we wanted to be into therefore it was incumbent upon us to sit down and start negotiations.”
Council sold its share of ownership to Continent 8 for $35 million USD with $25 million paid out immediately. Another $8 million will be paid out over the next five years, in addition to $2 million paid over the following five years with interest.
Council executive financial officer Paul Rice explained that the dividends, which council had received over the course of the relationship to supplement annual budgets, would not be coming Kahnawake’s way in the near future.
MCK chief financial officer Paul Rice explained the impasse council found itself at.
“Companies face a very basic decision: do you invest your earnings back into the company or do you pay them out as dividends?” said Rice. “Fundamentally, the company was moving in a direction where the earnings would be needed for growth, and us as shareholder wanted our earnings as dividends.”
Since 2006, the Mohawk Council’s investment in Continent 8 has brought over $100 million through dividends and other revenue streams, according to the MCK and Tewa.
Dividends are money paid regularly (usually quarterly) to shareholders in a company based on profits. For the past couple of years, the dividends brought in $3.4 million annually.
The Continent 8 shares were held by Onkwawista Limited, a holding company co-owned by MCK and Kahnawake’s Economic Development Commission, Tewatohnhi’saktha.
The sale of the shares is an opportunity, according to Norton.
“As far as I can see, it opens up the door for us to do other things with MIT in that particular area, if you want to call it, as a replacement,” he said.
If a sale were not made, the annual dividend payments loss would mean less money for services in the community.
“You can work on it, but at the end of the day if the money needs to go back into the company, we still have the value of the shares, but for us in Kahnawake, those dividends can be invested in things within the community so they provide more value,” said Rice.
“We had opposing views. We wanted dividends. They wanted to invest for growth, and ultimately this was the result at the end of the negotiation.”
Council and Tewatohnhi’saktha began discussing the sale over the winter, led by Rice and David Montour from the commission’s board of directors.
Continent 8 Technologies specializes in e-Gaming hosting services and international licenses and has centres in the Isle of Man, London, Singapore, Montreal, New Jersey and elsewhere.
It is essentially a data centre with servers, firewalls, tech specialists and other technologies that help companies set up secure networks and Internet-based products. Gaming, naturally, is a big part of the company.
The relationship between the company and the organizations in the community has been positive, according to economic development commission CEO Kyle Delisle.
“We’ve always had a good relationship between Continent 8 and the Mohawk Council of Kahnawake and Tewatohnhi’saktha through Onkwawista with our shareholdings,” said Delisle.
“When we’re in it to get the dividends and their future plans for growth were looking like they’re not going to be paying out a lot of dividends over the next few years, we had to look at it, and say what’s the real value in the company then? Maybe we can sell our shares in it and earn dividends in other ways… I think the deal we came to was a win-win for both parties.”
Continent 8 will still be a client of MIT and operating out of the local tech company.
The Eastern Door asked Delisle if it was a missed opportunity for those looking for work to not take advantage of the relationship with the international company that operates so close to home.
“I think it comes down the bigger question that we’ve discussed before; that we have a lot of job opportunities surrounding Kahnawake,” he said.
“Hopefully that’s one of the things we can do with the money, is to start looking at – the Mohawk Council of Kahnawake and Tewatohnhi’saktha together – to determine where are the priorities of this community. Where can we assure that if these opportunities are here, people within the community can take advantage of these opportunities? Can we take this money and ask where are investments needed in the community?”
The two organizations will now come up with a plan to find where the priorities of the community are and make the proper investments.
Norton said that discussions are underway at the table about where best to spend the influx of funds, and that the sale does not affect future endeavours already planned.
“It doesn’t prevent us from continuing in the gaming industry,” said Norton. “It doesn’t prevent us from doing the things that we want to do at Mohawk Internet Technology in terms of e-commerce and all the various things that we’ve talked about in future development in technology.”
