Rogers, BCE on verge of deal for MLSE

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Rogers Communications Inc. and BCE Inc. are on the verge of a deal to purchase a majority stake in Maple Leaf Sports and Entertainment for more than $1.3-billion.

MLSE said in a statement Friday that it was poised to make a major announcement later in the morning, though it gave no details. Sources said the deal would be announced within a matter of days.

Sources say the telecommunications giants have reached a draft agreement with the Ontario Teachers' Pension Plan to acquire about 80 per cent of MLSE, which owns the Toronto Maple Leafs, Toronto Raptors and a host of other assets.

The deal has not been finalized and still may fall apart, but the companies were in talks late Thursday night, and sources close to the situation said most of the key details had been worked out.

In particular, Rogers and BCE have won the support of minority owner Larry Tanenbaum, who owns 20 per cent of MLSE and has right of first refusal on any offer. His support clears a major hurdle for any deal.

If finalized, the sale would be one of the richest sales of sports assets in North America. In addition to the Leafs and Raptors, MLSE also owns the Toronto FC soccer club, as well as broadcast properties such as Leafs TV and Raptors TV.

The deal gives MLSE an equity value of roughly $1.66-billion, not including debt. Of that, Rogers and BCE are said to be paying about $1.33-billion for roughly an 80-per-cent stake.

At that price, MLSE has a total enterprise value of $2.1-billion, including debt.

The Ontario Teachers' Pension Plan could not be reached for comment.

The pension fund put its 80-per-cent stake in MLSE up for auction in March, but shut down the sale process on Nov. 25, after it didn't receive any suitable offers for the assets. Teachers was said to be seeking between $1.6-billion and $1.8-billion for its stake, believing the marquee sports properties should fetch a premium.

Rogers and BCE, which owns Bell, came close to submitting an offer in late November that was believed to have been between $1.3-billion and $1.4-billion. However disagreements between BCE and Rogers on how to divvy up the assets – in particular the television rights to Maple Leafs games – killed the bid.

Though the pension fund said in a press release that it received inquiries from several interested bidders, sources indicate none of the bids were what Teachers thinks the assets should fetch in an auction.

Mr. Tanenbaum's support of Rogers and BCE as majority owners is key because the companies are buying the assets in order to gain greater control over the broadcast rights of Leafs and Raptors games, which they want to show on their respective networks. BCE owns TSN and Rogers owns Sportsnet.

In addition to TV, the companies also want to stream that content over their wireless networks, though cellphones and tablet computers.

However, the previous shareholders agreement dictated that all broadcast rights must be put out to auction. Mr. Tanenbaum, as a 20-per-cent owner, could have prevented Rogers and Bell from having control over those rights.

For his support of the Rogers and BCE bid, sources indicate Mr. Tanenbaum will have his ownership stake sweetened, but it is not clear if that will be a direct cash payment or if he will receive a slightly larger share beyond 20 per cent.

As chairman of MLSE, Mr. Tanenbaum also carries considerable sway over key decisions made by the company.

The deal links the ownership of Toronto's three largest sports properties. Rogers Communications also owns the Toronto Blue Jays baseball club.

CBC, which carries Leafs games though Hockey Night in Canada, purchases the rights to those games directly from the NHL, so those games would not be affected, sources say.

The deal, if consummated, requires a variety of approvals from the NHL, NBA and Canada's broadcast regulator before it could be closed.