Leafs’ sale has consequences for Habs’ ownership

GeoffMolson

The sale of the Maple Leafs’ parent company, MLSE, to the three-way partnership of BCE, Rogers Communications and current part-owner Larry Tannenbaum has important implications for the Canadiens.

BCE is a partner in the Canadiens ownership group, having an 18 percent stake in the team and, of course, the Bell Centre for which it owns the naming rights.

BCE now wants to own 37.5 percent of MLSE (the same percentage as its corporate competitor Rogers) and not only will the entire purchase have to contend with questions from the Competition Bureau of Canada, BCE will also have to get approval from the NHL for having a piece of two competing clubs, the league’s oldest rivals.

It is possible that the Board of Governors could rule that BCE cannot hold pieces of both teams. It may not be the likely outcome.

However, should Bell be forced into that situation, they would have to decide on ownership of either the Habs or Leafs. Their divestment from the Canadiens would be highly problematic for the Habs’ ownership group; their departure from the Leafs sale might scuttle the entire transaction.

The league’s constitution (in Articles VIII and XIII) forbids an owner to have investments in multiple teams if he has a 30 percent investment in one of them, although there are some provisions under which the Board of Governors and the commissioner may grant a waiver.

George Cope, the CEO of BCE, said during Friday’s press conference his company intended to keep their stake in the Habs. “Our investment in Montreal Canadiens has been tremendous for Bell in our markets in Quebec and quite frankly that investment will be maintained,” he said adding Bell would work with the NHL “to accommodate any of their needs.”

Cope also alluded to a statement from Canadiens CEO Geoff Molson that said Molson looked forward to Bell’s continuing participation in the team partnership.

Bell’s solution is rather creative. Martine Turcotte, Bell’s Quebec vice-chair, disclosed to Canadian Press that the BCE will claim it complies with NHL rules on cross-ownership by splitting their stake between two supposedly independent entities, Bell itself and its employee pension plan.

“We approached it from a direct participation by Bell of 28 per cent in the MLSE,” she said. “We also have the BCE Master Trust Fund, which is an independent trust that deals with our retirement employees and where they are taking a 9.5 per cent participation.”

Mike Ozanian of Forbes Magazine calls that “some clever legal maneuvering” to get past the NHL’s requirement and added, “Those in the industry I have asked were unaware of any similar situation in the league.”

Will the NHL Board of Governors buy that?

Steve Simmons of The Toronto Sun reports BCE will have to make a presentation to the Board seeking approval for its dual ownership. He believes that presentation likely won’t occur until the summer of 2012, once the purchase of MLSE becomes official.

Simmons writes that Bell can also claim it will have no operating control of either the Canadiens or the Leafs.

“The Board, at that time, would in turn ask for appropriate safeguards to ensure that BCE had no operating influence in two different franchises,” Simmons writes. “That is the key to the issue. BCE might be allowed to maintain ownership in two franchises, but could not in any way be considered operating two franchises. The Board would then vote, approving BCE’s ability to own shares in two franchises, or force BCE to divest itself of the shares in the Canadiens.”

The complicated rules for what constitutes a controlling owner and a non-controlling owner are all set out in the NHL Constitution. Non-controlling owners cannot be involved in a number of club decisions, including all those related to players. That is obviously designed to prohibit a multiple-club owner from manipulating rosters of one of their teams to the benefit of another. The only approved communication the club can have with its non-controlling multiple team owner is on “periodic reports of overall profit and loss performance and business strategy.”

Along those lines, Tim Wharsnby of CBC.ca reports that Winnipeg Jets co-owner David Thomson owns a small percentage of the Canadiens (reportedly $20 million of the $575-million purchase price), but “in order to appease the NHL Board he now is a non-voting member of the Canadiens ownership group.”

Thompson’s $20 million investment is only about 3.5 percent of the Habs ownership, and under Section 4 of Article XIII, Thomson is permitted to maintain his share of the Canadiens as a non-controlling owner. A person or company can have non-controlling shares in up to three NHL teams as long as only one of them is more than a 10 percent share. Said to be the richest man in Canada, reportedly worth $23 billion, Thomson is a partner with Mark Chipman in True North, which owns the Jets, but his percentage in True North is unknown.

Simmons writes, “NHL commissioner Gary Bettman, surprisingly, has chosen not to address the matter publicly. NHL spokesman, Frank Brown, indicated ‘we will have no comment’ at this time.”

8 Comments

  1. Un Canadien errant says:

    So Rogers and Bell aren’t happy just being in bed with each other already, now they want to engage in unnatural acts involving the Canadiens and Maple Leafs? It will happen, but it shouldn’t happen.

    As far as the NHL is concerned, Bell’s share of the Montreal Canadiens should be easy to sell profitably on the open market, we’re not talking about the New Orleans Hornets or the Phoenix Coyotes here. Mr. Bettman should keep any appearance of impropriety (at least in those instances not involving Jeremy Jacobs and Colin Campbell) to a minimum by enjoining Bell to sell their stake in the Canadiens relatively quickly.

    In the wider view of the Canadian economy and consumer protection, the purchase of a sports and entertainment franchise like MLSE by the two great collusionists, er, ‘competitors’ of the telecommunications world is risibly indefensible. Rogers and Bell talk about how they’ll compete internally for the Leafs games among their broadcasters, possibly by using already established practices by which they set prices for mobile phone plans among themselves (“You want to raise prices 7%, we want to raise prices 9%, why don’t we settle on 10%?”)

    Two companies who are supposed to be fighting tooth and nail for customers, putatively by independently competing with each other to offer the lowest prices possible to customers, should have no opportunities to legally cooperate with in any area. We’re not talking about disaster management here or charity, where you can put differences aside for the greater good of the nation. They are trying to purchase MLSE to obtain valuable content for their telecom empires and get much much richer in the process. They are also trying to legitimize their de facto oligopoly in the eyes of Canadian society.

    The Canadian Competition Bureau, if it has any usefulness, should put the kibosh on this one immediately. While some might argue that it’s only sports, and therefore no big deal, in fact that in my mind makes it an even easier call to forbid this merger. This isn’t about being able to resist international competition or the survival of a company or saving jobs, as merger pirates always claim. This is about acquiring a cash cow and locking out competition, with no national interests threatened if the deal doesn’t happen. The Ontario Teachers’ Pension Plan simply can continue owning their stake until a better deal comes along.

    ———————————
    How about it NHL? No fighting, just hockey?

    http://relentlessineptitude.blogspot.com/

  2. Ground Chuck says:

    Something stinks about this…

  3. hopefully we get a new sponsor so the cell reception in the bell center wont “mysteriously” be gimped to non bell phones

  4. malmn says:

    Lawyers and business men (a.k.a. sharks in suits) can twist this anyway they want to but this deal remains bogus. Canadiens fans should boycott Bell.

    GO HABS GO!!!

  5. ABHabsfan says:

    Well I guess you learn something new every day! Thanks Stu!

  6. ABHabsfan says:

    My question would be;
    Could an owner with controlling interest in one team, say the Leafs, that has a say in player movement and other direct decisions, trade players of high value to ,say the Habs, for players of clear low value?
    If the Leafs are clearly out of the play-offs, what is to stop them trading Luke Schenn to the Habs to boost their play-off chances and therefore boosting the profits of the Club in which Bell has a non-controlling interest, but still an 18% share? A piece of that extra profit would still be attractive to a corporation, especially if their other team is making none.
    Still a fishy deal, it seems to me

    • Stu Hackel says:

      That’s a good question. My reading of the Constitution indicates that prior to this sort of trade, the owner must contact the Commissioner and let him know of the deal in advance, and the Commissioner can then veto the trade if he thinks it would be an unfair trade.

      So in the case you raise, the commissioner would inform the Leafs they cannot make that trade — Schenn to the Habs for a low value player — because it violates the Constitutional provision set forth in Article 13 Section 7d.


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