BUSINESS

THE GARDENS PLOT

BRENDA DALGLISH August 29 1994
BUSINESS

THE GARDENS PLOT

BRENDA DALGLISH August 29 1994

THE GARDENS PLOT

BUSINESS

Last year, Harry Omest and Steve Stavro looked like they were friends. A photo of the them at a big race in Los Angeles showed the two men happily posing together for the camera. Fifteen months later, Omest, the former owner of the St. Louis Blues of the National Hockey League and the Toronto Argonauts of the Canadian Football League, contends that Stavro, a Toronto grocery store magnate, is in a blatant conflict of interest. And Stavro, through his lawyer and associates, is calling Omest a “pest.” At issue is Stavro’s $125-million bid this spring to buy all the shares of Maple Leaf Gardens Ltd.—including the 60.3-per-cent stake held in Harold Ballard’s estate and controlled by Stavro because he is Ballard’s executor— for $34 a share. Omest, who owns 3.5 per cent of the Gardens shares, is refusing to sell for a price not set by the market. Last week an Ontario Court judge tentatively agreed and issued an injunction that prevented Stavro from acquiring the last 10 per cent of the shares. The resolution of the contest promises to be more exciting than a Stanley Cup playoff.

The first period ended when Justice Sidney Lederman of the Ontario Court mied that there was enough evidence suggesting that Stavro’s behavior was improper for the case against him to go to court. The request for the injunction came from the public trustee, an agency of Ontario’s attorney general that is responsible for looking after the interests of charitable organizations. As a result of Stavro’s $34 bid, the charities, which include, among others, the Princess Margaret Hospital, the Ontario Crippled Children’s Centre and the Salvation Army, will get nothing from the estate. All the proceeds will be used to pay the estate’s debts. But Justice Lederman ruled that the executors of Ballard’s estate, Stavro, Donald Crump, a well-known figure in the Toronto sports community who is now secretary and treasurer of the Gardens, and Terry Kelly, a lawyer from Oshawa, Ont., and a longtime friend of Stavro, had an obligation to get “the best price available in an open and informed market.” Omest claims that, while Stavro was making plans to buy the Gardens shares last year, he said nothing, publicly or privately, about the shares being for sale, even though Omest told him that he was interested in buying more shares. Said Omest: “I was speaking to him all the time socially and he never mentioned a word.”

Stavro, 66, unlike his old friend and predecessor at the Gardens, Harold Ballard, likes to keep a low profile. For a man who prefers to avoid the spotlight, last week must have been a double nightmare. Not only was his name splashed all over the news, but Lederman also drew a comparison between his actions and the duplicity of former president Richard Nixon in the Watergate political scandal. The judge also questioned the propriety of Stavro serving as both executor of Ballard’s estate and as chairman of Maple Leaf Gardens Ltd., the publicly traded company that owns the Maple Leafs hockey club and the 63-year-old arena in downtown Toronto, at the same time as he sought to buy the company’s shares.

A bitter fight over control of Maple Leaf Gardens goes to court

Among other parties interested in the outcome of the court challenge are John Labatt Ltd. and the new National Basketball Association franchise team, the Toronto Raptors. Both say that they would consider making a bid if the shares were on the market, j Stavro, who has refused all requests for interviews since the judge’s Aug. 15 decision,

was born in Greek Macedonia and came to Canada at the age of 7. He started his business career by operating a fruit and vegetable stand in Toronto’s working-class east end. From that humble start, he built a multimillion-dollar grocery empire in Toronto, Knob Hill Farms. Stavro’s personal fortune has been estimated at more than $200 million. But despite his lavish homes and his love of expensive horses, he remains active in his business, rising before the sun most days to visit some of his 10 stores. Stavro has also had a long interest in sports. As well as owning Knob Hill racing stable, which ranks among the best in Canada, Stavro was also an early investor in unsuccessful attempts to establish professional soccer in Canada during the 1960s. He also briefly owned the Toronto Toros of the World Hockey Association. Despite his friendship with Ballard, however, he showed no sign of wanting to own the Maple Leafs until after Ballard’s death in 1990.

The problems with the Gardens began in the spring of 1993, when Stavro, as executor of Ballard’s estate, sought appraisals from two investment dealers. They put the value of the Gardens shares in the $29-$34 range. Stavro then bought Ballard’s estate shares at the higher price and made the same offer to all of the other Gardens shareholders. Omest refused to sell. He claims that, based on the price paid for the Raptors basketball franchise earlier this year, among other things, the Gardens shares are worth at least $55 each. Ornest says that because Stavro did not announce that the estate was willing to sell Ballard’s controlling block of shares, their full value was not realized. Said Omest: “It was a well-planned secret scheme to take over the Gardens at his time and for his price, I without giving anyone else an g opportunity to bid.”

I But Stavro’s lawyer Brian J Bellmore, who is also a director of Maple Leaf Gardens, says that there was no indication that anyone else was interested in bidding for them. Cmmp says that the executors were simply following the wishes that Ballard set out in his will. And he insists that the company has yet to see serious interest from other bidders. “Maple Leaf Gardens is like the Hope diamond,” said Cmmp last week. “There are all kinds of people out there who, if you asked them, would say that they’d like to own it. But until someone brings me a certified cheque, I don’t take it seriously.”

Several serious suitors, however, have since stepped forward to express interest in

buying the company. David Peterson, the former Ontario premier who is chairman of the group that won the Raptors franchise, says that the club, which is committed to providing a new stadium facility for the team by 1997, is interested in the Gardens. He said that the Raptors first preference would be to do a joint venture with the company to build a new facility that could be used for both hockey and basketball. However, he said the group is also interested in buying the shares if that were an option. John Bitove, a Toronto food service operator who heads the Raptors franchise, is related to Stavro: his father is Stavro’s cousin. But a spokesman for Bitove says that the two have not talked recently and that their relationship is not close.

Other serious bidders include John Labatt Ltd., which recently backed away from making a bid for Madison Square Gardens in New York City. Following Justice Lederman’s decision, Labatt management said that if the estate’s control block of Maple Leaf Gardens shares were put up for sale, it would consider buying them. So did Concert Productions International, a Toronto-based rock concert promoter that is backing the current Rolling Stones tour and is partially owned by Harold Ballard’s son Bill.

For his part, Ornest told Maclean’s that although his immediate priority is to get the best price for his shares, he has also been approached by two groups of prominent Torontonians who are planning to make bids for the Gardens shares if the court rules that they have to be put on the market.

Last week’s court injunction is the second public sign of an apparent conflict of interest on the board of Maple Leaf Gardens Ltd. In October, 1991, not long after Stavro took over as chairman, two of Toronto’s most high-profile business leaders, Ted Rogers, owner of Rogers Communications Inc., which last March acquired Maclean Hunter Ltd., the parent company of Maclean’s magazine, and Thor Eaton, whose family owns Eatons department stores, left the Gardens board. At the time, in an unusual public warning that the board was not operating in the best interests of all shareholders as it is required by law to do, Rogers told reporters that the board needed truly independent directors “nominated by someone other than the controlling shareholder” to protect the interest of minority investors. Instead, Stavro appointed his lawyer, Bellmore, and a friend, Kelly. And he subsequently acted as both buyer and seller of the Ballard estate shares.

As for what Ballard would think of the controversy that continues to dog the Gardens, no one knows for sure. Crump, a longtime crony, says that Ballard foresaw some of the problems when he informed Crump several years ago that he had named him an executor. “He told me: ‘I’ll put you on the board, Duck (Ballard’s nickname for Crump),’ ” he recalled last week, “ ‘but you guys will be in court for years.’ ” That call was on the money.

BRENDA DALGLISH