The Ontario Teachers' Pension Plan is keeping its stake in the company that owns the Toronto Maple Leafs after an eight-month review and as the team is off to one of its best seasons in years.
The big pension fund said Friday it will keep its control of Maple Leaf Sports and Entertainment, a company that "has been and continues to be a very successful investment" since Teachers acquired control a decade ago.
It gave no reason for its decision, but sports industry watchers say prospects for the hockey team are brightening.
The Leafs have missed the playoffs since 2003-2004, but experts say that if the team reaches the post-season this year, it could mean a windfall worth millions for the team's owners.
"Playoff games are very lucrative," said Bruno Delorme, a sports marketing professor at Concordia University in Montreal.
"Teams do not pay salaries during the playoff season and salaries are 50, 60, 65 per cent of a team's costs ... so the revenues they make almost go straight to the bottom line."
Delorme estimated that playoff games can mean $1 million to $2 million per game in extra profits.
Norm O'Reilly, a business professor at the University of Ottawa who has studied sports team valuations, said the improvement on the ice can translate directly to the bottom line.
"The team looks like it's on an upward trajectory and so it is probably a very wise decision," he said of Teachers' decision not to sell.
"Let's say the team keeps growing for five years and wins the Stanley Cup in 2017, the value will be significantly higher ... championships equal value."
The Leafs last won the Stanley Cup in 1967.
Teachers' launched a review of its ownership stake in Maple Leaf Sports—an 80-year-old company formerly known as Maple Leaf Gardens Ltd.—in March after it received inquiries from possible buyers.
Teachers' president and chief executive Jim Leech said at the time that some "interesting numbers" were being whispered about how much MLSE might be worth.
"So we'll see if those numbers turn into reality and if they don't it's business as usual. It's a great asset," he said earlier this year.
Maple Leaf Sports is a profitable company, with sports and real estate operations, but valuing the company and its major league properties—the Leafs and NBA's Raptors—can be a tricky proposition with estimates in the neighbourhood of $1.5 billion to $2 billion.
The Leafs are better this year, but they have struggled for years and the Raptors are stuck in a lockout by the league. The first month of the NBA season has already been cancelled as the union and owners fight over a new contract with no settlement in sight, wiping out millions in revenue.
But even so, O'Reilly said the NBA franchise has value.
O'Reilly noted that MLSE has worked hard to build value beyond the hockey rink and compared them with AEG, the company behind the Los Angeles Lakers that also owns sports franchises and stadiums around the world.
"They're using that sports-entertainment focus, so you can see them getting into theatre productions, you can see them getting into expanding and running their own concert series, you can can see them adding other facilities," he said.
Teachers' increased its stake in MLSE to 79.5 per cent in September with the purchase of TD Capital Group's 13.5 per cent stake. At the time, it was thought the move was a step to streamline the sale of the pension fund's stake in the team.
Kilmer Sports, which is controlled by Toronto businessman Larry Tanenbaum, owns the remaining stake and holds a right of first refusal on any sale by Teachers'.
U.S. private equity firm Providence Equity Partners—the company behind the Yankees Entertainment and Sports Network—had expressed an interest in buying the MLSE stake.
Rogers Communications Inc. (TSX:RCI.B), which owns the Toronto Blue Jays baseball franchise as well as numerous media and telecom businesses, was also named as another possible bidder.
In additionto the Leafs and the Raptors, MLSE also owns the AHL's Toronto Marlies, the MLS's Toronto FC soccer club and the Air Canada Centre, as well as several media assets.
Richard Peddie, president and chief executive of MLSE, is expected to retire at the end of the year.
A search for his replacement had been put on hold while the ownership was in question, but the company said it will resume the search now that Teachers' has made its decision.
"Teachers', along with Kilmer Sports, are great owners. They have always provided our teams with the resources needed to compete," MLSE said.