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Stavro sells interest in MLSEL

Wednesday, 12.02.2003 / 12:00 AM / News
Toronto Maple Leafs
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Stavro sells interest in MLSEL
(CP) -- A board providing pensions for more than 88,000 retired teachers and their survivors will be the majority owner of the Toronto's Maple Leafs and Raptors under a complex reshuffling of a sports empire announced Tuesday.

The Ontario Teachers' Pension Plan will have a 58 per cent interest in Maple Leaf Sports & Entertainment Ltd. after the dust settles from a sale of Steve Stavro's interest in the teams and their Air Canada Centre arena to multimedia giant Bell Globemedia.

The sale collapses a parent company of MLSE and changes each shareholder's stake in the teams, boosting the Ontario Teachers' Pension Plan's overall holdings to a majority position.

Steve Stavro has sold his interest in MLSEL.

But the Pension Plan denies it will be a deterrent to the potential success of the lucrative hockey and basketball franchises by using its majority equity stake to keep a cap on team payrolls.

That's despite concerns by die-hard Toronto sports fans - particularly those of the Leafs, anxious to see the team boost its payroll to secure its first Stanley Cup since 1967 - that the Pension Plan will be far more committed to the bottom line than its fans.

"We've committed to making this a winning organization and we don't lose by doing that ... with a winning organization, we're better off because it's worth more," Robert Bertram, executive vice-president of investments for the pension fund and an MLSE board member, said in an interview Tuesday.

The plan's mandate is to secure the best possible investments for its members, who also include 154,000 elementary and secondary school teachers and 92,000 former teachers.

That mandate won't change when it comes to the Leafs and Raptors, but Bertram said the pension fund has been committed to the success of both teams over the past decade, when it has had a minority stake in operations.

The NHL and NBA teams and Air Canada Centre are among the $68 billion in the Pension Plan's assets.

The reshaping of MLSE will come after Stavro, chairman of the company since 1994, sells his stake to Bell Globemedia, in a deal expected to close this spring. The deal allows the multimedia giant to add two of Canada's biggest sports franchises to its broadcast, Internet and publishing assets.

Construction magnate Larry Tanenbaum will become MLSE's new chairman, effective July 1, replacing Stavro, who will continue as board chair until June 30.

Under the sports company's complicated new ownership structure, the Teachers' Pension Plan will have 58 per cent of MLSE, Bell Globemedia will get 15 per cent, TD Capital's share will increase to 14 per cent and Kilmer Sports, owned by Tanenbaum, rises to 13 per cent.

Tanenbaum said that under the deal, there will be "significant debt that has been converted to shareholder equity," which sources say will total about $300 million. That debt was built up from the purchases of the Raptors and Air Canada Centre in recent years.

An emotional Stavro who conducted the acquisition of the Raptors and the Air Canada Centre four years ago, told reporters he has fulfilled his responsibilities to the late Harold Ballard, the Leafs' former owner.

"This change in ownership guarantees that Canada's team - the Leafs and the Raptors, will remain in Canada, in Canadian hands," the 75-year-old Stavro, who rarely speaks to the media, told a news conference Tuesday.

Stavro did not take questions after his short statement.

The deal comes a week after Thomson Corp. sold its interest in Bell Globemedia to Woodbridge Co. Ltd., a company controlled by the family of billionaire Kenneth Thomson. After that reorganization, BCE Inc. will own more than two-thirds of Bell Globemedia, and Woodbridge the rest.

Woodbridge's investment in Bell Globemedia includes an interest in certain loans given by Woodbridge to companies held by Stavro. That debt is being converted into equity in MLSE for Bell Globemedia.

Stavro, a familiar face in the stands behind the Leafs' bench at home games, had closed his Knob Hill Farms grocery store chain, unloaded certain real estate assets and sold a horse racing operation in 2000 to keep his MLSE stake.

It's been reported he got $100 million from the deal with Bell Globemedia that values MLSE at about $1 billion. MLSE officials won't confirm the figures.

Sources said Bell Globemedia wanted Stavro's stake partly to keep rival media companies from owning Canada's most valuable sports franchises. Rogers Communications, which owns the Toronto Blue Jays baseball club, was rumoured to be interested in MLSE two years ago.

Tom Curzon, group vice-president of communications for Bell Globemedia, wouldn't comment on "rumours and speculation."

However, Bell Globemedia CEO Ivan Fecan said in a statement that the company's participation in MLSE "is complementary to our core broadcast business."

"Bell Globemedia has extensive national reach in Canadian sports through TSN and RDS and already enjoys a good working relationship with MLSE," Fecan said of Bell Globemedia, which also owns broadcaster CTV, and national newspaper the Globe and Mail.

"With the support of our two shareholders, we will move forward with even greater focus on our key media brands with the intent of strengthening our overall financial performance."

TSN has regional broadcast rights to Leafs games.

MLSE president Richard Peddie said Bell Globemedia will be "15 per cent shareholders, but they do not get any special treatment (regards broadcasting rights)."

Asked about the Pension Plan's role in running the team, Peddie said the group let the experts run the company.

"Economically, Teachers does own 58 per cent. If you study Teachers - and they have investments in numerous companies - they own that investment and they leave it to management to run that investment."

The transaction between Stavro and Bell Globemedia will result in Peddie being given a seat on MLSE's board of directors. The Pension Plan will have three of nine seats on the board, while Bell Globemedia will have two, including Fecan, and TD Capital will have one. Tanenbaum will be board chair, and Dale Lastman, a lawyer with Goodmans LLP, will hold a seat.

Leaving the board will be Brian Bellmore, who was seen as Stavro's right-hand man.

Tanenbaum left the board a few years ago amid reports of a blowup with Stavro.

"My leaving the board had more to do with my other business commitments. I now have sorted a lot of that out so that I'm able to spend more time at this and I'm looking forward to that," Tanenbaum said.

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