We make an offer beyond be-Leaf
BENJ GALLANDER and BEN STADELMANN
One of the hallowed mantras of investing is "diversify, diversify, diversify," or as Granny said, "Don’t put all your eggs in one basket." For the Ontario Teachers' Pension Plan, which manages $96 billion in assets, virtue becomes a necessity.
The OTPP’s various investments include Ontario, Canadian, American and international bonds; major league shopping malls; public companies BCE, Manulife and TD Bank; and private companies Hancock Timber Resource Group and Luscar Energy Partnership, just to name a few. Yup, while teachers' salaries and benefits might be considered modest, collectively they sure own a heck of a lot of stuff.
Last week, many media outlets reported that the OTPP is looking to cut its ownership in Maple Leaf Sports and Entertainment, home of the Toronto Maple Leafs, Toronto Raptors, the Air Canada Centre and condominium towers.
The Contra Guys want to buy that stake.
When we look to acquire something, our contrarian bent takes us to deep-value territory. While MLSE might not be a bargain in terms of dollars, it is obvious that, if operated correctly, the organization would increase dramatically in value.
Let’s look at the main components. The Toronto Maple Leafs are nearing 40 years without winning Lord Stanley’s Cup. Worse than that, they really haven’t even sniffed it, with not one of their squads playing in the finals since 1967. The probability of such a lengthy drought strains our calculator’s ability to cipher. That they have remained on the south side of dismal is particularly remarkable when you consider that prior to this year, the franchise had a huge advantage as it boasted the wherewithal to pay its players more than most other teams.
MLSE’s other major venture, the Toronto Raptors, took a few years to evolve into futility. As a new team, they naturally floundered on the court, but they started to jell when Vince Carter joined the cast. However, when his discomfit grew, the organization caved and traded him for two benchwarmers and a player who was paid $10 million to depart without playing a game. Seriously, how can a business not do more due diligence to avoid such a crappy outcome?
The fact is, given the hapless record, fans ought to boycott anything MLSE touches instead of continuing to proffer their fervent support. These failures offer us an opportunity to grease our palms once we have acquired MLSE, because even given our inexperience, the teams should only fare better. And we know that the loyal butts will remain firmly ensconced in the seats, even if we choose to raise prices.
There’s just one problem: we don’t have the kind of cash that the Teacher’s can demand for their piece of the action. Yes, we are successful in the stock market, but those eight- and nine-figure sums never seem to accumulate in our bank accounts.
So some creative financing is in order. We’re ready to buy a minimum of one percent of the team for a token payment of $1. This amount is open to negotiation, and, without wanting to play with an open hand, we'll say that we could increase our offer by as much as a thousandfold, which everyone knows is a lot. In return, we promise to do a number of things.
First, we will change the Toronto Maple Leafs' name to the Toronto Teachers. While many fans and commentators talk about the team’s tradition, four decades without a championship is not a heritage to be maintained. We can hear the fans yelling, "Teachers, Teachers, Teachers!" That will not only give these professionals pride to carry back into their respective schools, thereby offering additional self-confidence to our children, but is tremendous advertising for their line of work. Ultimately, this will attract even better people to this honourable calling.
Second, we will guarantee that the Toronto Maple Leafs will be in the finals within five years. While we would like to pledge a Stanley Cup, that is too much of a crapshoot, given the number of teams in the league. Mathematically, the Leafs, err, Teachers, should not be expected to win the Cup for at least 15 years. By making it further into the playoffs, though, the overall value of the franchise will increase, giving the Teachers a better return on their remaining stake.
Third, as awful as the Raptors appear, there is gold in that there hardwood. We promise that this motley crew, whose playoff hopes were effectively dashed a mere 15 games into the 2005-2006 season, will make the ACC a basketball Mecca within five years. End of story.
Next, we will lobby the government to eliminate the 50 percent entertainment tax write-off for tickets. Hey, if someone brings his buddies and their kids to the box, they should not have a tax advantage. Plus, some corporations will then give up their seats, opening more for the real fans. However, we do promise to allow all spectators, universally, irrespective of their financial station, to buy beer and popcorn as they see fit with the Harper government’s $1,200 childcare payout.
If any of our pledges do not come to pass, we will give our stake in MLSE to the charity of the Teachers choice in exchange for four rubbery Air Canada hot dogs, orders of fries, and beverages of our choice. We want our better halves to benefit from our deal-making.
We phoned the OTPP and left a message. Sandra Gemmill, the executive administrative assistant to Bob Bertram, the executive V-P investments, responded with one of her own: "There is no interest in selling MLSE shares."
How could she be so sure? They didn’t even hear our offer.