Bell Canada Goes Private

Canada's largest telecommunications company, BCE Inc. (Bell Canada) (NYSE/Toronto: BCE), has agreed to be bought out in the largest takeover in the country's history. The company accepted the US$48.8 billion bid by the Ontario Teacher's Pension Plan and Providence Equity Partners on Saturday, June 30. The deal works out to $40.17 per share and also includes the purchase of $15.9 billion of debt.

If the deal closes successfully it will result in an enormous profit for shareholders. BCE says that final price tag is a 40 percent premium on the average share price before privatization talks became public. Shares of BCE closed at $26.01 on March 28, the day before it was first reported that the company was possibly in takeover talks. (See Bell Canada Denies Takeover Rumors.)

Since then, it has been a rigorous bidding process that has endured its fair share of criticisms of BCE and the procedures it put in place for its sale. These questionable procedures led to perhaps the most high-profile Canadian bidder, Telus Corp. (NYSE: TU; Toronto: T) dropping out last week hours before the deadline to submit a bid. (See Bidding for Bell Canada Heats Up.)

Canadian regulations barring foreign control of more than 47 percent in telecommunications companies presented another hurdle for Canadian companies in raising enough capital to pull off the deal. For example, the bid by the Canadian Pension Plan Board that had the backing of U.S. private equity giant Kohlberg Kravis Roberts & Co. (KKR) would have been an all-cash bid while the other bids are much more complex and highly leveraged.

In the end, the Ontario Teacher's Pension Plan, which was the largest shareholder with 6.3 percent, will now hold 52 percent of the company, and its U.S. partner, Providence, will hold 32 percent. The remaining pieces will be held by other private investors.

BCE had originally stated that it planned to make a decision on its privatization strategy sometime in the third quarter of 2007. It happened much more quickly than that, coming on the last day of the second quarter.

— Raymond McConville, Reporter, Light Reading

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