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Rogers to Buy Majority Stake in MLSE – What Does it Mean?

Posted By Ben Fisher On Dec 1 2010 @ 12:42 pm In Toronto Maple Leafs | 1 Comment

Forgive me for sounding like double-rainbow guy [1] in the title, but by now we know that, according to a Toronto Star report [2], Rogers is in talks to buy the Ontario Teacher’s Pension Plan’s majority stake in Maple Leaf Sports & Entertainment for $1.3 billion. The question becomes, what does it mean and what effect will it have on the Toronto Maple Leafs, Toronto Raptors and Toronto FC franchises.

The answer to those questions is not an easy one, at least not yet. While neither Pension Plan nor MLSE spokespeople have denied the negotiations, neither side will confirm the talks or say anything on record about Rogers’ involvement. That means we’re left to speculate on what, should it come to pass, would be the biggest business deal in Canadian sports history.

What does it mean for Rogers?

While it’s unknown if the Pension Plan has opened up the bidding to any other potential buyers at this time, it looks like it could be a major coup for the communications giant. With the Toronto Blue Jays and Rogers Centre already under their belt, a run at the Leafs, Raptors and Toronto FC would offer a near monopoly of Toronto’s pro sports market (and forgive Rogers for not being too concerned with David Braley’s Toronto Argonauts).

Even though no one knows the company’s mindset at this point, there’s already much speculation that having control over three of the city’s big four franchises would allow for a level of control over television rights that could have Rogers taking aim at TSN. Since they’d also own Leafs and Raptors TV, along with GolTV Canada, there’s the possibility for a merger of the channels into one major network with pre-established hockey, basketball and soccer interests. Comparisons are already being made to the New York-based MSG Network, which holds TV rights for the New York Rangers (NHL), Knicks (NBA), Liberty (WNBA) and Red Bulls (MLS).

One interesting off-shoot of this possibility is the role of Rogers Media president Keith Pelley in opposing CTV globemedia, his former long-time employer.

The $1.3 billion cost seems pricey at first glance, but the Leafs (2009 estimated value: $470 million) and Raptors (2009 estimated value: $386 million) are money-makers and there are plenty of potential attached business ventures (ie a mega-television network to rival TSN) that offer an opportunity for profit.

What does it mean for the Ontario Teacher’s Pension Plan?

Which brings us to the Pension Plan and why they would want to divest themselves of shares that were a consistent source of profit. The reality is, the OTPP never had an emotional attachment in their investment, caring less about team success than simply increasing the value of their stake in MLSE (aka – why they were so unpopular amongst the knowledgeable portion of the Leafs’ fan base).

Their decision to sell their controlling interest – a decision that was recently predicted by some observers who saw them also sell off their shares in Maple Leaf Foods – comes simply from the standpoint of knowing they’ve essentially maxed out their profit margins. That is, they can’t increase ticket prices any further without investing more money into the losing teams for fear of further alienating fan bases that are no longer willing to accept losing. That empty seats have been found at most Leaf home games this year and no Raptor contest at the Air Canada Centre has sold out has to be reason for concern, so the Pension Plan appears ready to take their $1.3 billion and run, to the dismay of no one.

What does it mean for Maple Leaf Sports & Entertainment?

Now, talks are just talks and MLSE chairman Larry Tanenbaum, who, himself, holds a 20.5% stake in the company, still holds a first right of refusal before any sale to Rogers is complete. You have to figure, however, that Tanenbaum has seen the continued commitment from Rogers towards the improving Blue Jays, even in the wake of the death of Ted Rogers.

Developing winning franchises still benefits MLSE’s bottom line, as their real estate holdings are not part of the sale and would receive a boost from having playoff contenders housed nearby. Maple Leaf Square, the MLSE-owned downtown community of condos and a plaza which includes the Real Sports Bar & Grill, Longo’s, new E11even restaurant and a public area featuring a big screen television, would certainly be bolstered by more wins coming from the neighbouring ACC.

What does it mean for the fans?

Getting the Teacher’s Pension Plan out of the picture is a successful step in and of itself, but having Rogers on board is also a major benefit.

Rogers President and CEO Nadir Mohamed came under scrutiny immediately after taking the post in March of 2009 for fear that he did not hold the emotional attachment to sports (specifically, the Blue Jays) that Ted Rogers had and, thus, would not make ownership of the Jays a priority. However, Mohamed has continued that commitment in the two years since for the club on the rise, a great sign for Leafs and Raptors fans.

Obviously, unlike Major League Baseball, the NHL, NBA and MLS have cap restraints which limit the potential for out-spending rivals. However, an added financial investment in both facilities and scouting for all involved teams still allows for wealthy ownership to offer a competitive edge.

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URLs in this post:

[1] double-rainbow guy: http://www.youtube.com/watch?v=qBtE7W74XJM

[2] according to a Toronto Star report: http://www.thestar.com/sports/hockey/article/899562--rogers-in-1-3b-talks-to-buy-majority-stake-in-leafs-empire

[3] Subscribe to author's RSS feed: http://www.prosportsblogging.com/author/ben-fisher/feed/

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