Monday, March 14, 2011

Maple Leafs are for sale

Maple Leaf fans are likely pleased to hear that Ontario Teachers’ Pension Plan is putting its share of Maple Leaf Sports and Entertainment up for sale. The expected price is $1.3 - $1.6 billion will mean that the next owner will more likely be a corporate entity than an individual.

The Maple Leafs have had a history of weak ownership though in the sports franchise marketplace there are likely more bad owners than good ones. In the case of the Leafs, over the past 40 years we have seen the eccentric Harold Ballard who essentially destroyed the brand with his inept interference. He was succeeded by Steve Stavros who tried to right the organization but developed personal financial problems that forced him to abandon the rebuild.

Then along came OTPP which took control of the Leafs in 2003. The OTPP have been neither a good or bad owner although many fans have vilified OTPP and accused them of not spending money to produce a winner. Certainly MLSE was purchased as an investment and not because the OTPP was interested in sports team ownership so the bottom line has been paramount. But they also understand that success in the playoffs also generates profits. After all, players are fully paid at the end of the season so playoff revenue becomes highly profitable. So the OTPP understands the value of playoff revenue from a business perspective if not from a fan’s perspective.

However, the value of the OTPP portfolio is about $100 billion so the Leafs represent only 1% of their investments. Plan executives have shown little interest in investing time in running this asset. Richard Peddie was hired to manage the business and act as a buffer for ownership. OTPP executives have rarely been seen in public. There are no media interviews, no meet and greet with fans and season ticket-holders and players do not hang out with the owners.

This is the reality of sports ownership today. Often you have a wealthy kook interfering with management or a passionless corporate owner looking at the bottom line. Take the example the new Buffalo Sabre owner Terry Pegula who is a passionate Sabre fan. Will he be able to step back from being a fan and allow management to make proper hockey and business decisions? We shall soon see.

So while Leaf and Raptor fans look forward to new ownership, that doesn’t mean a turn for the better. The asking price and the potential profits of MLSE will attract a certain type of owner. There is a good chance that the new owner will be similar to the existing one. The sports conglomerate might attract potential owners willing to overpay slightly because the sports franchises can be aligned to enhance existing business. That would include Rogers Communications and Bell Globemedia. The track record of Rogers as owner of the Blue Jays has not been that encouraging. In the case of the Jays they have indicated that they would spend money to support a winner but have not spent money to create a winner.

So I am also pleased to see Teachers sell their share of MLSE but I don’t see any reason to be optimistic quite yet.

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