TORONTO (Reuters) - The Ontario Teachers' Pension Plan has shelved plans to sell its 80 percent stake in Maple Leaf Sports and Entertainment Ltd, the "trophy asset" owner of Toronto's big-league hockey and basketball teams.
Teachers, one of Canada's largest pension fund administrators, began gauging the market for a sale of the stake in March, after several unsolicited expressions of interest.
"Teachers has concluded this eight-month process with the decision to maintain its stake in MLSE, which has been, and continues to be, a very successful investment," the pension manager said in a statement on Friday.
MLSE owns the National Hockey League's Toronto Maple Leafs, the National Basketball Association's Toronto Raptors and the Air Canada Center, the downtown arena in which the two teams play. Its stable includes several other sporting franchises and related broadcasting assets and property.
Industry observers were not surprised by the decision because of how well the asset has performed and because of a reduced pool of potential buyers in uncertain markets.
"It's a trophy asset," said David Rogers, a partner at Caledon Capital Management and the former head of private equity at the Ontario Municipal Employees Retirement System pension plan.
"It's a wonderful asset, generating great returns, and you'd only sell it if you felt you were getting a very fair price, or you felt the opportunity to put that money to work somewhere else was very positive."
The franchise had reportedly caught the interest of strategic and private equity players, drawn to the big revenues generated by the Maple Leafs, and to a lesser extent by the Raptors, even though both teams have failed to reach the playoffs in recent years.
Last week a report in the Toronto Star newspaper said Providence Equity Partners, a U.S. based private equity firm, was looking at buying the stake.
Private equity players were skeptical of the report, saying sports teams are not typical targets of private equity investors because they are difficult to value on a cash flow basis.
Instead, sports teams are more often purchased by high net worth individuals willing to pay a premium for assets they regard more for their cache than as a source of profit and revenue.
"I think it's very hard to surface that type of individual in this type of market," said a partner at another large Canadian private equity firm.
A year ago media reported that Rogers Communications - owner of Major League Baseball's Toronto Blue Jays - was in talks to buy Teachers' then 66 percent stake in MLSE for about C$1.3 billion ($1.25 billion).
Teachers - with C$107.5 billion in managed assets at the end of 2010 - raised its MLSE stake to around 80 percent in September after completing the purchase of a 13.46 percent stake from TD Capital Group. When it announced the purchase a few months earlier, it said adding the stake would improve its chances of completing a sale of the entire holding.
"One possibility might be that they couldn't get a price that they wanted, or they may have got a price that they wanted but hockey didn't want the person," said Andrew Zimbalist, a sports economist at Smith College in Northampton, Massachusetts.
Additional reporting by Euan Rocha; editing by Frank McGurty