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Exteriors of Air Canada Centre and the entrance to Maple Leaf Sports and Entertainment which is located there. Rogers is reported to be interested in buying MLSE and all it's holdings which include the Toronto Maple Leafs hockey team, the Toronto Raptors basketball team and Toronto FC. (Fred Lum/The Globe and Mail)

Fred Lum/The Globe and MailNewspaper

The Ontario Teachers' Pension Plan confirmed in a press release Saturday that it will explore the possibility of selling its 66 per cent majority share of Maple Leaf Sports and Entertainment.

The fund said it would not comment further on the matter.

Teachers' chose to take this route after speculation about a sale prompted a number of potential buyers to express their interest, according to a source close to the matter.

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The pension plan received a lot of calls in the past few weeks from parties who would consider buying its stake, and chose to hire advisors and officially explore a sale.

According to sources, Ontario Teachers wants a minimum of $1.5-billion for its 66-per-cent stake in MLSE. That is a 25-per-cent premium over what the shares are worth, as an MLSE source pegged the value of the entire company at $1.8-billion last fall.

One source said Larry Tanenbaum, who holds the second-largest stake in MLSE, has no plans to sell his shares. Most insiders believe he will make a play for control of the company.

Tanenbaum was at the Toronto Maple Leafs game at the Air Canada Centre on Saturday night but refused to comment.

Tanenbaum owns 20.5 per cent of MLSE and has the right of first refusal on the Teachers shares along with the third company shareholder, TD Capital, which owns the remaining 13.5 per cent. The shareholder agreement allows them to buy Teachers' shares in proportion to the shares they own.

This means Tanenbaum is allowed to buy 60.3 per cent of Teachers' 66 per cent, which is 39.8 per cent of MLSE. If he does, Tanenbaum would have a 60.3-per-cent share of MLSE. If TD exercises its right to buy, it would get 39.7 per cent of the shares, although it is unlikely to do so.

Several years ago, Bell Globemedia sold half of its 15-per-cent share in MLSE and Tanenbaum was the buyer. This raised his ownership share to 20.5 per cent and put him in position to buy a majority share of MLSE whenever Teachers decided to sell.

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

However, there is a catch in the partnership agreement, which means taking control of MLSE could cost Tanenbaum more than the $1.5-billion Teachers wants for its shares.

The shareholders have to take all the shares offered or take none, which means Teachers will not be stuck with any leftover shares. So Tanenbaum would have to be prepared to buy all of the Teachers shares he is entitled to, and all of the Teachers shares TD is entitled to.

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.

However, an MLSE source said that is unlikely to happen because all three shareholders have a friendly relationship. Any deal will be quietly worked out between them.

Montreal Newspaper La Presse reported on Saturday that Ontario Teachers' has hired investment bank Morgan Stanley to find buyers.

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MLSE owns the NHL's Maple Leafs, NBA's Raptors, Major League Soccer's Toronto FC as well as cable television interests and the Air Canada Centre, Ricoh Coliseum and BMO Field.

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