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Teachers want $1.5-billion for its MLSE stake Add to ...

The asking price for the stake held by the Ontario Teachers' Pension Plan Board in Maple Leaf Sports and Entertainment is $1.5-billion (U.S.), sources say.

The sale price represents a 25-per-cent premium over the estimated value of the assets, which include the Toronto Maple Leafs, the Toronto Raptors, Toronto FC of Major League Soccer and the Toronto downtown arena, Air Canada Centre.

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Teachers is not actively shopping its 66-per-cent share in the company, but is open to offers, as it has been for several years. The investment company may be further motivated by the possibility of a work stoppage in the NBA next season and also in the NHL in 2013. Either stoppage could affect cash flows significantly and potentially interfere with a sale..

The NHL's board of governors meets Monday in Florida. If Teachers intended to sell at this time, or had an offer on the table, the annual meeting would be an opportunity to begin the process formally with the league. However, Teachers does not intend to inform the NHL board that the stake is in play.

Rogers Communications Inc. inquired about Teachers stake "six to eight months ago" but backed away, according to an MLSE source.

Edward Rogers, son of the company's late founder, Ted Rogers, is said to be more interested in acquiring MLSE than the company's president and chief executive officer, Nadir Mohamed, and several other directors.

"They've always wanted to sell, it's nothing new," a member of the NHL board of governors said, referring to Teachers. "They're a fund. They've made their money and they're ready to move on. [Rogers]would love to own it, but I think the price tag is too high for them."

When Teachers does decide to sell, fellow MLSE shareholders Larry Tanenbaum and TD Capital have the right of first refusal by terms of their partnership agreement. And Tanenbaum is known to aspire to succeed Teachers as majority owner.

"If Teachers were to ever do anything, they're not going to go make a deal with Rogers and then have Rogers go and talk to Tanenbaum," an MLSE source said. "It's all going to happen at the same time, they're going to communicate. The relationship is all good, there's nothing bad happening here and no one doesn't like each other."

Teachers loathes public controversy, a source said, and a deal would likely be completed quietly, in contrast to this week's media uproar. There was also media speculation on Wednesday about the existence of a shotgun clause, wherein Tanenbaum would be forced to sell his shares if he was unwilling to buy the Teachers shares. Sources say that clause is not in place.

When Teachers offers its shares for sale, Tanenbaum (20.5 per cent) and TD (13.5 per cent) have the right to buy them in proportion to the amount of shares they own.

Under this formula, Tanenbaum is entitled to buy 60.3 per cent of Teachers 66 per cent, or 39.8 per cent of MLSE. That would increase Tanenbaum's share of MLSE to 60.3 per cent. TD would get 39.7 per cent of the shares, presuming it bought the shares it was entitled to buy.

When CTVglobemedia sold half of its 15-per-cent stake in MLSE in December of 2008, Tanenbaum bought it to increase his ownership share to 20.5 per cent from 13 per cent. That move positioned him to buy a majority share of MLSE when Teachers sells.

When Bell Globemedia sold its remaining shares, Tanenbaum did not buy any because increasing his stake did not change his right of first refusal.

The catch in the agreement is the shareholders have to take all the shares offered or take none. That means Teachers does not get stuck with the leftovers. So Tanenbaum would have to be prepared to buy all of the Teachers shares he's entitled to, and all of the Teachers shares that TD is entitled to. But, it's pretty unlikely that TD would want to increase its stake.

For example, if Teachers offers Tanenbaum the 60.3 per cent of its shares he's entitled to, and TD the 39.7 per cent it's entitled to, and Tanenbaum accepts but TD declines, Tanenbaum has to buy the 39.7 per cent. Otherwise, those shares can be sold on the open market.

"But the world doesn't work like that," an MLSE source said. "It won't come to that. It will all be worked out together."

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