Will $48.5B Deal For Bell Canada Pass Muster?

Bell Canada Enterprise (BCE) has been bought out in one of
the largest leveraged buyouts ever. The Canadian Telecom giant which has
phone, internet, wireless, Satellite TV and media holdings including CTV and
The Globe and Mail newspaper is set to be acquired by for US$48.5 billion.

BCE will be acquired by a consortium of investment firms led by the Ontario
Teachers Pension Plan and its private investment arm Teachers Private
Capital. Teachers will be joined by Providence Equity Partners Inc. and
Madison Dearborn Partners, LLC. in all cash deal that will include the
assumption of debt, preferred equity and minority interests.

Pending approval by regulatory authorities in Canada and BCE shareholders
the ownership of BCE is expected to be Teachers Private Capital 52 percent,
Providence 32 percent, Madison Dearborn percent and other Canadian
investors 7 percent.

The group will pay $42.75 Canadian per share , which BCE noted in a
statement is a 40 percent premium over the undisturbed average trading
price ofBCE common shares in the first quarter of 2007, prior to the
possibility of a privatization transaction surfacing publicly.

BCE expects the deal to formally close in the first quarter of next year.

Though BCE has formally announced a winner in the bidding process, the
battle for BCE may not necessarily be a done deal. The Globe and Mail
which is owned by BCE reported online today that Canadian carrier Telus and
U.S. buyout firm Cerberus Capital Management LP are still considering
options for taking a run at owning BCE.

The leverage buyout of BCE follows the surprise announcement earlier last
week that Telus, which has the CRTC (Canadian Radio and Telecommunication
Commission – the Canadian equivalent of the FCC) franchise for wire phone in
much of Western Canada pulled out of the bidding. Telus according to
published reports in Canadian media over the last month had been pushing to
create a Canada-wide carrier. Regulatory and competition issues (since both
Telus and BCE operate separate wireless networks) were speculated to have
helped scuttle the deal.

BCE put itself up on the block in April of this year as a way to ‘enhance
shareholder value’.

The move followed a divisive political decision in Canada as the
Conservative Government of Canada reneged on an election promise not to
interfere in the Investment Trust market. BCE had been on a track to become
an Investment Trust, which under Canadian securities laws skirts certain
taxation laws.