Bloomberg News

Rogers, BCE Buy Maple Leaf Sports in C$1.32 Billion Deal

December 16, 2011

(Updates with closing share prices in sixth paragraph.)

Dec. 9 (Bloomberg) -- Rogers Communications Inc. and BCE Inc. agreed to buy a controlling stake in Maple Leaf Sports & Entertainment Ltd. in a C$1.32 billion ($1.3 billion) deal to own the most valuable team in the National Hockey League.

Rogers and BCE, Canada’s two largest phone companies, will buy a 75 percent stake in Maple Leaf Sports from Ontario Teachers’ Pension Plan in a cash transaction. Canadian businessman Larry Tanenbaum will increase his holding to 25 percent from 20 percent, according to statements today.

The acquisition fits with BCE’s and Rogers’ strategies of adding content they can sell to subscribers on smartphones, tablets and computers. In addition to the NHL’s Maple Leafs, which have won the Stanley Cup championship 11 times, Maple Leaf Sports owns the National Basketball Association’s Raptors.

“Now you’re getting to people with so many more devices and outlets and ability to access content, the value of that content is going to be more valuable, and that’s what this seems to be a play for,” said Jeff Young, chief investment officer at NexGen Financial Corp., which oversees C$900 million including shares of BCE and Rogers.

Rogers committed C$533 million for a 37.5 percent stake in Maple Leaf Sports, according to a company statement. BCE and its pension fund will also contribute C$533 million for an equal stake. The transaction is expected to close in mid 2012. It gives Maple Leaf Sports, also owner of Toronto FC of Major League Soccer, an enterprise value of C$2 billion.

Rogers fell 0.5 percent to C$36.76 at the close in Toronto. BCE, based in Montreal, climbed 0.3 percent to C$40.74, its highest level since November 2007.

Tanenbaum Stays Chairman

Tanenbaum continues as chairman of Maple Leaf Sports and as a governor of the NHL, NBA and Major League Soccer.

The Maple Leafs are the NHL’s most valuable franchise at about $521 million, Forbes said Nov. 30, up from $505 million a year ago. The Raptors are worth $399 million, placing them 10th out of 30 NBA franchises, Forbes said in January.

Investor Jim Hall and Dvai Ghose, an analyst at Canaccord Genuity in Toronto, expressed skepticism about the value for phone companies to invest in sports teams.

“I have yet to be convinced of the merits of owning or controlling content in the telecom game,” said Hall, manager of the C$820 million Mawer Canadian Equity Fund, which owns both stocks. Enbridge Inc., a Calgary-based oil pipeline operator, “doesn’t need to own oil fields and refineries to make money shipping stuff down their pipes. Why do Rogers and BCE?”

Questionable Strategy

Investing in sports is a questionable strategy, said Canaccord’s Ghose, who recommends holding Rogers and BCE.

“They should be spending on what they are there in existence for, which is providing network connectivity to customers, wireline and wireless,” he said.

A sale of the Maple Leafs and Raptors must be approved by the NHL and NBA.

Bell, a BCE unit, will own 28 percent of Maple Leafs Sports, and its pension fund will hold 9.5 percent. BCE Chief Executive Officer George Cope said at a press conference that the company is committed to its investment in the Montreal Canadiens hockey team and that he “will work with the NHL to accommodate their needs.”

The structure of the deal, with Bell’s investment under 30 percent, will probably enable the company to keep the Montreal Canadiens, Maher Yaghi, a Desjardins Securities Inc. analyst, said in a note to investors.

Competition Bureau

The deal, if approved, would also give BCE and Toronto- based Rogers control of the Marlies minor-league hockey club and the Air Canada Centre, which can seat as many as 19,800 spectators.

Canada’s Competition Bureau will review the proposed transaction to determine, like in any merger, “whether they are likely to result in a substantial lessening or prevention of competition,” Alexa Keating, a spokeswoman for the regulator, said in an e-mail.

BCE’s TSN competes with Rogers’ SportsNet channel, and Cope said the stations will share coverage of Leafs and Raptors games.

“Competition on the broadcast side just got a whole lot more intense,” Cope said at the press conference, when asked whether he anticipated regulatory scrutiny.

The CEO said that he became interested in adding sports content after seeing how BCE’s sponsorship of the 2010 Vancouver Winter Olympics spurred viewership on smartphones and tablets.

Canadian Hands

Rogers owns Major League Baseball’s Toronto Blue Jays and the nearby Rogers Centre stadium. CEO Nadir Mohamed said that it’s an “important point” that this deal keeps ownership of Maple Leaf Sports in Canadian hands.

Teachers’, Canada’s third-biggest pension fund said in March that it may sell its majority stake in the NHL and NBA teams after receiving unsolicited expressions of interest. The fund, based in Toronto, then said Nov. 25 it would keep its 80 percent stake in Maple Leaf Sports.

“Less than a week later, we were unexpectedly approached by Rogers and Bell by a new, unsolicited offer,” Jane Rowe, Teachers’ head of private equity, said today at the press conference in Toronto. “It was comprehensive, firm, and it met all of the terms and conditions that we at Ontario Teachers’ considered necessary.”

Rowe declined to say how much Teachers’ made from its investment. Morgan Stanley advised the pension fund on the sale, and CIBC advised Rogers.

The value of the deal dwarfs other recent acquisitions of professional sports groups. The National Football League’s Jacksonville Jaguars were sold to Pakistan native Shahid Khan, owner of auto-part maker Flex-N-Gate Group for about $750 million last month.

The NHL’s Atlanta Thrashers were sold to Winnipeg, Manitoba-based True North Sports & Entertainment and moved to Winnipeg earlier this year. The sales price was $170 million, including a $60 million relocation fee that was split by the rest of the league, according to ESPN.

--With assistance from Kevin Bell and Matt Walcoff in Toronto, Curtis Eichelberger in Washington and Jeffrey McCracken in New York. Editors: Cecile Daurat, David Scanlan

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net


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