BCE Agrees to Buyout
Under the terms of the transaction, the investor group will acquire all of the common shares of BCE not already owned by Teachers for an offer price of C$42.75 per common share and all preferred shares at the prices set forth in the attached schedule. Financing for the transaction is fully committed through a syndicate of banks acting on behalf of the purchaser. The purchase price represents a 40% premium over the undisturbed average trading price of BCE common shares in the first quarter of 2007, prior to the possibility of a privatization transaction surfacing publicly. The transaction values BCE at 7.8 times EBITDA (earnings before interest, taxes, depreciation and amortization) for the 12-month period ending March 31, 2007.
"This proposed transaction concludes a comprehensive and disciplined review of the company's strategic alternatives launched April 17," said Richard J. Currie, Chairman of the Board of BCE. "It will deliver substantial value creation for our shareholders. In addition, a majority of the equity will be owned by Canadians."
"The transaction delivers to our shareholders the economic benefit of the work done to focus on our core business and to strengthen Bell with a new cost structure and new competitive capabilities," said Michael Sabia, President and CEO of BCE. "All members of the investor group have outstanding track records in building strong and resilient enterprises and they share our commitment to customers, our employees and the communities we serve."
"It is gratifying to see that BCE's Board of Directors shares our vision for this initiative, and we are honoured to lead the largest buyout transaction in Canadian corporate history," said Jim Leech, Senior Vice-President, Teachers' Private Capital, noting that Teachers has been a major BCE shareholder since the early 1990s. "The Board has recognized our commitment to BCE's ongoing growth potential, through our proposed investment strategy. We made it clear in our proposal that we have carefully considered the potential for BCE and its ongoing status as a Canadian icon. We strongly believe that all BCE shareholders, Canadian consumers, and employees, including senior management, who will continue to direct the company from its headquarters in Montreal, will benefit from this transaction. We look forward to working together with BCE to make this a reality."
"This is a unique opportunity to contribute to and participate in the growth of one of the world's most significant communications companies," said Jonathan M. Nelson, Chief Executive Officer of Providence Equity Partners. "BCE offers state of the art services through its sophisticated network that extends throughout Canada. We look forward to working with BCE's talented management and employees and our partners to build on the strong platform that is in place for the benefit of all of the company's stakeholders."
The equity ownership of BCE would be as follows: Teachers Private Capital 52%, Providence 32%, Madison Dearborn 9% and other Canadian investors 7%.
The purchaser has obtained a debt commitment to finance the transaction subject to usual terms for these types of financings. The purchaser anticipates requiring BCE, Bell Canada and Bell Mobility to redeem outstanding redeemable debentures maturing up to August 2010 pursuant to their terms as of and subject to the closing of the transaction. The acquisition debt financing would become an obligation of BCE and be guaranteed by BCE's then subsidiaries (other than Bell Aliant Regional Communications Income Fund and Northwestel Inc.). As to Bell Canada, the purchaser's financing would comply as to ranking and security with the then existing Bell Canada debentures and medium term notes issued under the 1976 and 1997 indentures. In addition, the purchaser has obtained commitments to make available a combination of facilities in order to support the ongoing liquidity needs for the company.
The transaction is subject to the customary approvals, including CRTC approval for the transfer of Bell's broadcast license, and Industry Canada with respect to the transfer of spectrum licenses.
The transaction includes a break-up fee of C$800 million (US$751 million), payable by BCE in certain circumstances and a reverse break-up fee of C$1 billion payable by the purchaser in certain circumstances. The transaction will be completed through a plan of arrangement, which will require the approval of two-thirds of outstanding common and preferred shares, voting as a class. Shareholders will be asked to vote on the transaction at a special meeting, the details of which will be announced in due course. The company anticipates that the transaction will be completed in the first quarter of next year.
BCE Inc. (Bell Canada) (NYSE/Toronto: BCE)