Tanenbaum is soft-spoken in person, and he shies away from the media spotlight. But sources say he pulls no punches when it comes to business deals. The man tasked with protecting Tanenbaum’s interests is Dale Lastman, a son of former Toronto mayor Mel Lastman. As co-chair of Goodmans LLP, the younger Lastman is one of the country’s most powerful and successful lawyers. And, according to many people who have dealt with him, he is also one hell of a negotiator. (Tanenbaum declined to be interviewed for this article.)
The team at Teachers’ knew from the get-go that the tough-minded Tanenbaum camp could be a major impediment to a sale if it chose to be—a deal-breaker, in fact. Teachers’ bought TD’s stake in MLSE to gain a bit more clout at the bargaining table.
The discussions about MLSE were sensitive for TD, since it has major media and communications clients. It also did not want to find itself in a dustup between Teachers’ and Tanenbaum. Thus even though the MLSE investment was not especially large or strategic for the bank, chief executive Ed Clark got personally involved in the conversations with Rowe and her colleagues.
Rowe would not comment on any specifics about the negotiations. The transaction may have looked like a power move to outsiders, but she says that Teachers’ bought TD’s stake simply so prospective buyers would only have to reach agreements with two owners, not three. Said bidders now found themselves vying for a 79.53% stake in MLSE, as opposed to two-thirds.
As the first round of bidding got under way, Teachers’ received a decent amount of interest: from at least one private equity fund, various communications firms, wealthy individuals, even average Canadians who tried to pool their money. But no one involved in the process will say exactly how many bids came in.
What is clear is that, before long, Teachers’ got a big surprise. One source says that the first time the pension plan’s officials learned of the joint Rogers-BCE bid was when they went to a meeting in Nadir Mohamed’s office—and George Cope walked in. Leech told the duo it was a “cute move.”
Cute or not, there were still hurdles to surmount, not the least of which were: (a) the duo was bidding significantly below what Teachers’ considered to be the value of its stake, and (b) BCE and Rogers still had to strike a final deal with Tanenbaum, who wanted to bolster his rights at MLSE.
What followed were many late nights and tense discussions. Teachers’ would not budge on price. BCE and Rogers made it clear to Tanenbaum that they were most interested in the right to broadcast games to their cellphone customers and could not brook any interference from a co-owner on that fundamental.
While Teachers’ and TD had been essentially on the fence about whether to sell or hold their stakes, Tanenbaum was adamant about his position. Not only did he want to remain chairman, he wanted more control over the company.
In November, eight months after the auction process began, BCE and Rogers still hadn’t met Teachers’ price and Rowe had run out of patience. Teachers’ put out a press release saying game off: It had decided to keep its stake in MLSE. And word started spreading that it had a “plan B” for MLSE.
Rowe, who won’t say what “plan B” was, insists Teachers’ wasn’t playing bargaining games. “We were pretty transparent,” she says. “We took it off the market because we thought enough is enough, we need to get on with life. [MLSE CEO]Richard Peddie’s going to be retiring shortly [see Exit Interview, page 64] we have big issues we need to deal with, the NBA was in the throes of their strike, so we thought in fairness, on behalf of everybody in this process, let’s move on.”
In any event, Teachers’ press release kick-started negotiations. Within days, Rogers, BCE and Tanenbaum struck a deal that met Teachers’ asking price. As a result, the telecom giants are set to get their grail of broadcast rights; and Tanenbaum not only remains chairman of MLSE, but he also managed to increase his slice of the pie from 20.5% to 25%. And as for Teachers’, it will make a fivefold return on its investment when the deal closes this summer, subject to league and regulatory approval. Forbes called it “the Greatest Sports Deal in History” because it showed sports franchises can be as rewarding to clear-eyed investors as they are to jock sniffers. Best estimates indicate Teachers’ made a cool billion on MLSE.