$48.5B Deal For Bell Moves Forward
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The trend towards technology privatization can be blocked or pushed forward by governmental regulatory hurdles, no matter if the company is in the U.S or Canada.
Bell Canada Enterprise (BCE) is now on the Government-approved side of regulators for its $48.5 billion U.S.-leveraged buyout deal that will see the publicly held telecom giant privatized.
The key hurdle in the approval by the Canadian Radio and Telecommunication Commission (CRTC), the Canadian equivalent of the FCC, was foreign ownership concerns -- with foreign in this case being U.S interests.
"The application under review proposed to privatize the country's largest communications company and included significant foreign interest," Konrad von Finckenstein, Q.C., chairman of the CRTC, said in a statement.
"Consistent with previous decisions, we have imposed conditions to address our concerns relating to corporate governance. These conditions will ensure that control of BCE remains in Canadian hands once the transaction is completed."
The investors taking BCE private include Teachers' Private Capital (the private investment arm of the Ontario Teachers' Pension Plan) Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.
To ensure Canadian control, the CRTC has demanded that the chairman of the board must be a Canadian. Additionally, six directors on the board must be nominated by Canadian investors, while only five may be nominated by non-Canadians.
BCE had originally expected the privatization to be completed in the first quarter of 2008 and has now revised the close to be expected in the second quarter of 2008.
The move to protect a technology vendor by a Federal government is interesting to note in comparison to a recent failed transaction in the U.S.
Networking vendor 3Com's $2.2 billion bid to go private by way of Bain Capital and Huawei recently fell apart. In the 3Com case, the deal had to be approved by the U.S. Treasury Department's Committee on Foreign Investment in the United States (CFIUS).
Due to foreign ownership concerns related to Huawei, which is based in China, CFUIS approval never came.