Tanenbaum was kingmaker in MLSE deal

Larry Tanenbaum's self-esteem must be pretty high today, after the chief executive officers of two of Canada's biggest companies sang his praises all Friday morning.

If you recall, Mr. Tanenbaum held all the keys to the castle that is Maple Leaf Sports Entertainment. Because he holds a right of first refusal on the 80-per-cent stake owned by Ontario Teachers Pension Plan, effectively a veto right on potential buyers, BCE and Rogers Communications needed his blessing for their bid to go through.

"Once I met with George and Nadir... there was absolutely no need to ever think of using the veto," Mr. Tanenbaum said on Friday, referring to chief executive officers George Cope and Nadir Mohamed.

In return, the two CEOs buttered him up in public. "In my opinion, without Larry Tanenbaum, there is no transaction," BCE's Cope said at the press conference. (Of course, taken literally, that's true given Mr. Tanenbaum's powers, but he wasn't saying it in that context.)

"If it wasn't for his diligence over the past few weeks, we would not be standing here this morning," Mr. Cope added.

But with all the talk about Mr. Tanenbaum, there was one thing they barely mentioned: his increased stake in MLSE, which jumps from about 20 per cent to 25 per cent.

As part of the deal, it has been revealed that MLSE will undergo a leveraged recap, adding debt to boost earnings, but nothing has been said about exactly how Mr. Tanenbaum will go about increasing his stake.

There's a good chance BCE and Rogers are simply offering it up to him as part of the recap. While that makes it look like he's getting a higher stake 'for free,' keep in mind that MLSE's shareholder agreement required its broadcasting rights to be auctioned off to the highest bidder. At the press conference, Mr. Nadir hinted that both Rogers and BCE have now signed long-term broadcast agreements with MLSE. No more auction.

Techincally, Mr. Tanenbaum could have got more money if they were sold publicly. To account for that potential value, it looks like the new owners gave him a higher stake, and that bump is worth about $80-million.