The Ontario Teachers’ Pension Plan’s announcement on Friday that it has agreed to sell its ownership in Maple Leaf Sports & Entertainment for $1.29 billion makes its investment in the Toronto Maple Leafs and the Toronto Raptors the greatest sports deal ever. The pension plan stands to make about four times its estimated investment in the deal, or nearly $1 billion in profits.
Ontario Teachers’ is selling its 79.5% stake to Rogers Communications and BCE, ending a transaction that has become a template for big financial investors that have started to make private equity-type deals in professional sports teams. The deal, which spans a 17-year period, has helped reshape the economics of sports, showing that sports teams are not just trophy assets and represent excellent investment opportunities if they are managed well. In addition, much to the dismay of the Toronto fan base, Ontario Teachers’ has proven that winning is not a necessary component for investment success.
None of this could have seemed possible in 1994 when Ontario Teachers’ invested $50 million for a 49% stake in the Toronto Maple Leafs and its run down hockey arena. Maple Leaf Sports & Entertainment, or MLSE, ended up paying $1 million to settle civil charges from Ontario securities regulators because of the sketchy way the deal has handled. Shortly after, Ontario Teachers’ had to navigate MLSE through a nightmare sexual abuse scandal as grown men reported being victimized at the hockey team’s arena in the 1970s and 1980s.
Still, Ontario Teachers’ stuck with the investment, putting more money into MLSE in 1998 to buy the Toronto Raptors and finish building a new arena. The pension also increased its ownership stake in MLSE, purchasing slices from some of its partners. It even added a soccer team and a real estate development to MLSE’s assets. In total, Ontario Teachers’ investment in MLSE over the years is in the neighborhood of $300 million.
Perhaps the best move, however, was installing Richard Peddie as MLSE CEO. A marketing genius, Peddie absorbed a lot of the criticism from Toronto fans about the inability of the teams he presided over to win a championship. The Toronto Maple Leafs have not won a Stanley Cup since 1967 and haven not made the playoffs for six seasons. Still, Peddie delivered the kind of financial results that sports owners really care about.
Indeed, it’s nearly impossible to find a sports investment that is comparable to MLSE. The Steinbrenner family is sitting on a similarly large kind of financial gain with the New York Yankees and its related assets, but the family has yet to realize the profits. Other sports owners have done well owning sports teams, but none have realized the massive-sized gain Ontario Teachers’ is now achieving. The big winners here: 295,000 teachers in Ontario, both active and retired.