Rogers, Bell agree to deal for MLSE

BCE Inc. (BCE-T) and Rogers Communications Inc. (RCI.B-T) have struck a deal to buy 75 percent of Maple Leaf Sports and Entertainment, giving the telecommunications giants majority ownership over a lucrative sports empire with highly sought after television content.

Together, BCE and Rogers will take control of a franchise that produces some of Canada's most-watched live sports programming. This content is one of the hottest commodities in broadcasting because advertisers are willing to pay top dollar when viewers are likely to sit through commercials.

The deal also gives the buyers control over both ends of the broadcasting spectrum, creating "the perfect marriage of content and distribution," Rogers Chief Executive Officer Nadir Mohamed said at a press conference on Friday.

Under the purchase agreement with Ontario Teachers' Pension Plan, BCE and Rogers will buy 75 percent of the company in a joint bid, splitting their ownership evenly. Larry Tanenbaum will also boost his stake from 20.5 percent to 25 percent, giving him ownership of the rest of the company.

The deal values MLSE, the parent of the Toronto Maple Leafs, the Toronto Raptors, the Toronto FC soccer club and other assets, at just over $2 billion, including debt. Teachers' 80 percent stake is being sold for $1.32 billion.

That Teachers agreed to a sale came as a surprise. Just two weeks ago the pension fund publicly announced that its 80-percent stake in MLSE was no longer on the block because it did not receive bids that met its terms and conditions.

On Friday morning, Jane Rowe, senior vice-president of Teachers' Private Capital, noted that "less than a week later, we were unexpectedly approached with a new, unsolicited offer. It was comprehensive, it was firm, and it met all the terms and conditions that we considered necessary."

BCE and Rogers had been working on a deal prior to that announcement, but ultimately could not agree on terms, with speculation that television rights were a sticking point. However, they both came back to the table because they understand the importance of getting their hands on top-notch live sports programming.

"In our rapidly changing technology driven world, the one thing that hasn't changed is our love for sports and excitement for watching sports in this country," BCE Chief Executive Officer George Cope said at a press conference on Friday. "We believe that live content is going to be increasingly important."

"Nobody wants to watch a game two days later," Mohamed added.

This deal isn't the first time the two companies have teamed up for a sports deal. BCE and Rogers partnered together during the Winter Olympics in Vancouver, and they worked together on a bid to obtain broadcasting rights for the last World Cup, but ultimately lost to CBC.

At the press conference, Mohamed said that dominating in "sports and local [coverage] has been our focus for some time."

BCE and Rogers own two of the most-watched sports programming channels in Canada, with BCE controlling The Sports Network (TSN), and Rogers operating Sportsnet. The dominance of these networks has raised the question of competition in the marketplace and whether the networks could lock up coverage of live games and provide access only to their subscribers.

"You will have no reason to miss one minute, or one second, of these teams," Mohamed said, attempting to allay the concerns.

Cope agreed, noting that the firms remain in fierce competition. "We will be racing to get this content on our network before our competitor," he said.

However, the two companies hinted that they have entered into long-term broadcasting agreements with MLSE, but the details have not been provided. Mohamed said more information will be made public in the future.

Before BCE and Rogers can claim ownership of MLSE, the deal must get regulatory approval, as well as the blessing of the National Hockey League. Once obtained, Teachers will remain majority owner until the summer, and will then transfer MLSE to Rogers and BCE.

BCE is the owner of Bell Media, the operator of Business News Network.