OMERS reaches deal to buy stake in MLSE for $400-million

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Ontario Municipal Employees Retirement System has closed a US$400-million deal to buy an indirect 5-per-cent stake in Maple Leaf Sports and Entertainment, the parent company of hockey’s Toronto Maple Leafs and basketball’s Toronto Raptors, from part owner Larry Tanenbaum.

The Toronto-based pension plan is buying a 20-per-cent stake in Kilmer Sports Inc., the holding company owned by Mr. Tanenbaum through which he controls a 25-per-cent stake in MLSE. Mr. Tanenbaum will keep 80 per cent of Kilmer Sports and stay on as chair of MLSE, also keeping board seats in the National Hockey League, National Basketball Association and Major League Soccer.

The transaction, worth $547-million at exchange rates cited by OMERS, values full ownership of MLSE at about US$8-billion.

OMERS will be a purely financial investor and will not have a role in operational decisions for MLSE or any of its teams, which also include soccer club Toronto FC and the Toronto Argonauts of the Canadian Football League. The pension fund will not have a seat on MLSE’s board.

Mr. Tanenbaum’s plan to sell a stake in MLSE to OMERS, through minority ownership in Kilmer, first surfaced publicly in June. The deal quickly ran into challenges when telecom giants Rogers Communications Inc. and BCE Inc., which each own 37.5 per cent of MLSE, sent a joint legal letter raising questions about certain aspects of the proposal. That raised the prospect of behind-the-scenes wrangling amongst MLSE’s owners over the fine print of OMERS’s investment. But the perceived disagreement over the terms of the transaction never came to a head.

In a statement on Monday announcing the deal with OMERS, Mr. Tanenbaum cast himself as “a steward of a public trust” in his role as an MLSE owner, and said: “Now with this investment by OMERS, I’m thrilled to be sharing this public trust with over 600,000 hard-working Ontarians.”

OMERS invests on behalf of employees and pensioners from about 1,000 employers such as municipalities, school boards and transit systems, and had $127-billion of assets as of the end of June.

“This is an exciting and unique opportunity for OMERS members in Ontario communities to be connected to these iconic sports teams in their own backyard,” Blake Hutcheson, OMERS’s chief executive officer, said in a statement.

It is not the first time Toronto’s most storied sports teams have had a pension fund as part owner. Ontario Teachers’ Pension Plan was an owner of MLSE for 14 years, starting at its inception, until it sold its stake of nearly 80 per cent to Rogers and BCE in 2012 for $1.32-billion.

The Globe and Mail has previously reported that Mr. Tanenbaum’s decision to sell a stake in the family-controlled Kilmer Sports is part of his estate planning, and that Rogers and Bell each have the right to acquire Mr. Tanenbaum’s stake in MLSE in the coming years. By selling a portion of his interest in the company to OMERS, he has helped establish its value for any potential future sale.

“Today is a good day for the future of MLSE,” he said.

Mr. Tanenbaum has been a power broker in North American professional sports for more than a quarter of a century. In 1998, he helped create MLSE two years after he bought a 12.5-per-cent stake in the Maple Leafs. Since then, the Raptors, Argonauts and Toronto FC have won league championships.