RealTime IT News

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.