The blockbuster deal to sell a 75 per cent stake in Maple Leaf Sports & Entertainment to Rogers and Bell Canada for more than $1.3 billion puts the Ontario Teachers' Pension Plan squarely at centre ice as analysts and observers try to figure out why the teachers are selling, and why now.
The teachers have made no secret of their desire to unload their majority stake in the highest-profile collection of sports interests in the country. They pulled their MLSE shares off the market barely two weeks ago after a fruitless eight-month search for a buyer. At the time, they said they simply didn't get the price they had been looking for, but the size of the deal suggests a deal with Rogers and Bell was already in play and the move was a negotiation tactic. Deals this size don't just materialize in a couple of weeks.
The reason for selling is simple: it's high time for the teachers to cash in. The plan bought its stake in MLSE 17 years ago for $180 million. With retirement rates expected to increase over the next few years, liquidity is the name of the game and there's no better means of achieving it than by selling off the jewel in the crown.
And that crown is a multi-studded affair. In addition to the Toronto Maple Leafs, privately held MLSE controls the National Basketball Association's Toronto Raptors, the Toronto FC Major League Soccer franchise, the American Hockey League's Toronto Marlies, the Air Canada Centre, BMO Field, LeafsTV and a range of real estate and television assets.
A Forbes Magazine report last week that named the Maple Leafs the most valuable NHL franchise — worth $521 million U.S. — reinforced the value proposition and accelerated the push toward a final deal. The teachers got their money out as the market value was peaking, while the broadcasters saw this as an opportunity to leverage their power in media and properly ownership to increase the relative value of the MLSE holdings.
All this comes as the fund faces an historic cash crunch. Its chief executive, Jim Leech, said earlier this year that the plan faces "systemic funding problems" due to shifting demographic trends. Longer life expectancies, low interest rates and continued economic uncertainty have all contributed to a funding shortfall that topped $17 billion in April 2011. The plan pays out $1.8 billion more annually than it takes in in contributions. Its sponsors, the Ontario Teachers' Federation and the Ontario government, are mandated to eliminate the gap by 2012.
Within this broader context, the teachers decided playing games had to take a back seat to cashing in.