Teachers' MLSE stake set to increase

The Ontario Teachers' Pension Plan says its in advanced talks with TD Capital Group to buy its stake in the company that controls the Toronto Maple Leafs.

The Ontario Teachers' Pension Plan is raising its stake in the company that owns the Toronto Maple Leafs in a move that could make it easier for the pension fund to sell its holding in one of Canada's most valuable sports properties.

The fund said Tuesday it's in advanced talks with TD Capital Group to buy its stake in Maple Leaf Sports and Entertainment, which also owns the NBA's Toronto Raptors, the Air Canada Centre and other sports teams and assets.

Teachers', which has long controlled Maple Leaf Sports, said it has reached an understanding on the principal financial terms with TD Capital (TSX:TD), but did not say what they were.

The fund confirmed earlier this year that it has been exploring "strategic alternatives" regarding its ownership in Maple Leaf Sports and Entertainment including a possible sale.

It's estimated the sports team operator could be worth between $1.5 billion to $2 billion since the Leafs are a lucrative money maker in what has long been one of the best hockey markets in the world.

Teachers paid $180 million in 1994 to buy into what would become Maple Leaf Sports and holds 66 per cent of the company. TD owns just under 13.5 per cent.

Teachers' president and chief executive Jim Leech said the TD agreement would streamline the sales process.

"Last year a number of people whispered interesting numbers in our ear and so we decided to put a process in place," Leech said at the Bloomberg Economic Summit in Toronto.

"So we'll see if those numbers turn into reality and if they don't its business as usual. Its a great asset."

Leech said enhancing the pension fund's stake "reduces a number of variables" in the process, making it easier to attract buyers.

The deal would consolidate ownership of the MLSE company the hands of two owners: Teachers' and Kilmer Sports, which is controlled by Toronto businessman Larry Tanenbaum and holds a right of first refusal to match any sale offer under a shareholder agreement.

"The fewer people you are negotiating with the easier it is," McGill business professor Karl Moore said of the Teachers' deal with TD Bank.

Leech said the fund hoped to reach a decision on the sale by the summer, however he declined to elaborate on who potential buyers might be or how much they might pay.

He said the decision on whether to sell will come down to the math.

TD said it has been a financial investor in MLSE.

"As with any financial investment, we are prepared to exit at the right time and on the right terms," the bank said in a statement.

"We believe this proposed transaction affords us that opportunity."

The deal will be subject to NHL and regulator approvals.

Rogers Communications Inc. (TSX:RCI.B), which owns the Toronto Blue Jays baseball franchise, has been named a possible bidder for MLSE.

"Sports teams and sports events are no longer standalone events. They've become marketing vehicles. So the Raptors and the whole MLSE family are a marketing vehicle," said Bruno Delorme, a sports marketing professor at Concordia University in Montreal.

Delorme said the Leafs, Raptors and other MLSE franchises could provide content for Rogers on its Internet, television, radio, wireless and publishing businesses.

"It's hard to make money as a standalone unit, but if you have an empire like Rogers or Quebecor with multiple platforms then it makes sense," he said.

TD Capital Group holds a 13.46 per cent minority share in MLSE. Teachers' stake could increase to between 76.35 per cent and 79.53 per cent, subject to the MLSE shareholders' agreement.

Kilmer Sports holds about 20.5 per cent.

The Ontario Teachers' Pension Plan administers the pensions of 295,000 active and retired teachers in the province.

With a liability of billions of dollars on its books for future pension benefits it must pay to retired Ontario teachers, the pension fund faces tough choices as it tries to maximize the value of its investments so its long-term finances are sound.