TORONTO – Perennial rivals Rogers Communications and Bell Canada announced Friday that they are teaming up to buy a majority stake in Maple Leaf Sports & Entertainment for $1.32 billion.
The two communications companies purchased the 75% interest from the Ontario Teachers’ Pension Plan. Rogers will pay $533 million for a 37.5% stake in the sports empire, while Bell will pay $398 million for a 28% stake in MLSE, and it pension plan will invest $135 million for a 9.5% stake. In a concurrent transaction, Kilmer Sports Inc. (KSI) will increase its current 20.5% ownership interest in MLSE to 25%. KSI is owned by Larry Tanenbaum, who will continue to serve as chair of MLSE and as a governor of the NHL, the NBA and Major League Soccer.
MLSE owns and operates the Air Canada Centre, the NHL's Toronto Maple Leafs, the NBA's Toronto Raptors, MLS's Toronto FC, the AHL's Toronto Marlies, and sports television networks Leafs TV, NBA TV Canada, and GOL TV Canada.
For Rogers and Bell, the deal provides a plethora of desirable content for their respective sports channels, Sportsnet and TSN, and corresponding broadband and wireless networks.
"We're excited to partner with MLSE to create highly interactive and engaging experiences for hockey, basketball and soccer fans, creating the perfect marriage of content and distribution”, said Rogers’ president and CEO Nadir Mohamed, in a statement. “This investment fits squarely into our strategy of securing premium content and making it accessible to Canadians when, where and how they want it."
“Bell's ownership in MLSE supports our promise to deliver the best content to Canadians across every screen”, said Bell and BCE president and CEO, George Cope. “With our advanced broadband network investments, next generation Bell TV, Mobility and Internet services, and leading sports networks TSN and RDS, the Bell team looks forward to bringing the Leafs, the Raptors, the Marlies and Toronto FC to fans in new and innovative ways."
Scotia Capital analyst Jeff Fan said the transaction makes sense in terms of sports broadcast rights, the fastest growing content cost category in North America.
“The transaction should help limit the impact of rising sports content cost on BCE and RCI and eliminates the risk of MLSE creating a regional sports network similar to YES or MSG, protecting the value of BCE's TSN and Rogers' Sportsnet”, he wrote in a research note on Friday.
Canaccord Genuity analyst Dvai Ghose concurred, though questioned the long term value for Rogers and Bell.
“(W)e have never seen a cableco or telco show discernible value from sports franchise ownership and note that Comcast recently sold the Philadelphia 76ers and Cablevision spun out its holding in The New York Knicks, Rangers and MSG”, he wrote in a note to clients. “In our view customers want best in class connectivity from their carriers at low prices and with good customer service. We have never heard a consumer tell us that they chase an access provider based on content.”
The transaction is expected to close in mid-2012 and remains subject to regulatory and league approvals.
– Lesley Hunter
