|Bruce Arthur, National Post · Mar. 14, 2011 | Last Updated: Mar. 14, 2011 4:03 AM ET|
So it is official now, after months of whispers and speculation and chatter among Toronto's ruling class, or at least, the ruling class of Toronto's corporate monarchy. The Ontario Teachers' Pension Plan says it is considering a graceful exit from the hockey business, and the basketball business, and the soccer business. Teachers is taking its 66% share of Maple Leaf Sports & Entertainment, and putting it up for sale. Only serious bids, please.
Of course, that goes without saying. Teachers apparently wants $1.6-billion or so, depending on who you're talking to, which one Bay Street insider describes as about $300-million above what it's actually, actuarially worth. Toronto is a rich town. This is the Toronto Maple Leafs we're talking about, along with tagalongs like the Raptors and Toronto FC. Someone will buy, right?
Well, maybe. It's a marvelous property, considering its three professional sports franchises are all miles away from real success. The Leafs are the closest, which is about all you need to know. But it's profitable, guaranteed. The Air Canada Centre is not often dark, and the seats not often empty, and the registers not often silent. Throw in the prestige of owning the beating heart of this city's moribund sports scene, and there are going to be no shortage of bidders.
Of the three obvious candidates, two -Rogers and Bell -are telecommunications giants. They are dreadfully well-capitalized companies with properties that require sports content, and MLSE provides unmatched amounts of that. Rogers already owns the Blue Jays, and acquiring the Leafs and Raptors would enable the company to dominate the airwaves in the richest market in Canada. For Bell, it would do much the same. And since executive Keith Pelley's move to Rogers from TSN, the two have begun to truly compete over sports.
But they are also public companies with share prices to think about. Overpaying by too much could make Bay Street nervous, and that's no small consequence.
The third candidate is Larry Tanenbaum, who has the right of first refusal on the shares, and also has a coterie of exceedingly rich friends. Alone, Tanenbaum would probably have trouble with $1.6-billion. Put together enough wealthy partners who want a taste of glory -such as it is, in Toronto -and Tanenbaum could probably realize his dream of becoming Toronto's sporting king.
(And no, Jim Balsillie is not going to buy the Leafs. The NHL would sooner approve Muammar Gaddafi, with Hosni Mubarak as a minority partner.)
And of course, there is a fourth ownership candidate -the Ontario Teachers' Pension Plan. If Rogers and Bell get involved just to force the other to overpay, or to make sure the other won't get it, then it's quite possible neither will actually pull the trigger on Teachers' inflated price. And if that's the case, it is possible that Tanenbaum will just bide his time. He is buddies with some very rich people -Gerry Schwartz and Heather Reisman and their estimated $1.5-billion have often congregated with Tanenbaum in the front row -but who knows if now, with the price so high, is the time?
But if the behemoth is sold, then whoever is lucky enough to buy the Bay Street cashbox will learns that with the wonderfully lucrative returns come attached to a significant burden, one to which Teachers was largely immune. Public pressure.
Teachers is under pressure, but it's a different kind. There are almost as many teachers on its pension as there are active teachers paying into the plan -the ratio was 10-1 in 1970, and 1.5-1 in 2009. The plan, at present, is not fully funded for the future benefits it has to pay out.
The pressure on the money managers at Teachers is unrelenting, and enormous. And if they sell, they make a wonderful return on their investment, and can go back to owning stuff like Scotia Gas Networks PLC, and Orbis SICAV Global Equity Fund, and Birmingham International Airport -really -and outside of the teachers of Ontario, not a lot of people will really care.
But unless the buyer is another similarly faceless entity, the next owner of MLSE will experience a very different game. The Ontario Teachers' Pension Plan never had to sell anything to anybody but the members of the pension plan. That was its constituency, so if Toronto was disgusted or outraged, the only way Teachers truly cared was if it affected the bottom line. It never really did.
But should Rogers buy in, or Bell buy in, or Tanenbaum make his leap, the pressure will change. If Bell owns MLSE, customers can express their displeasure by going to Rogers. If Rogers owns MLSE, customers can vote with their feet by shopping with Bell. Either company would try to hook people in by using MLSE content on their cellphones and iPads and various platforms, but at least there would be a way to show you weren't happy with whoever replaces Teachers and Richard Peddie. Teachers never offered that opportunity, unless you were a teacher who could take early retirement.
And if Tanenbaum -or any other would-be Ted Rogers, who if he was still alive would probably already have signed the cheque -attains the prize, then the stakes become enormous. The Leafs aren't the Toronto Blue Jays. They aren't the Raptors. When Brian Burke was named Leafs general manager in late 2008, he said: "The guy that turns this team around and wins a championship here, they're going to name schools after him. That's how it works ... I like the pressure that's put on the team. The pressure that's on the players and the coach and the general manager to me is a positive thing."
It can be, until you fail. When coaches fail, they are fired. When general managers fail, they are fired. When players fail, they are replaced.
And when owners fail, they are vilified. It's a big bet, being the owner of the Toronto Maple Leafs. You can be Harold Ballard or you can be Teachers, and either way you will not be remembered fondly. Succeed, and you will become legend. Best not to fail.
I wonder if the bank will give me a loan for $2 Billion.
|Scott has been introduced to the rave scene, and Ecstasy, by Craig. The two of them go out on the weekends, with some of Craigs friends, and stay up all night, dancing in a drug-fueled trance. |
Last edited by Moral Hazard on Apr-26-2011 at 07:48