BCE Demands $1.2B Breakup Fee

The $51 billion acquisition of BCE Inc. (Bell Canada) (NYSE/Toronto: BCE) has been called off by the buying consortium -- so now Bell Canada wants its $1.2 billion breakup fee.

The acquisition of the Canadian incumbent by BCE Acquisition Inc. -- a group of investors comprising Teachers’ Private Capital and affiliates of Providence Equity Partners , Madison Dearborn Partners , and Merrill Lynch Global Private Equity -- was due to close today, but was called off late Wednesday night. (See Bell Canada Heads for Pre-Christmas Sale.)

One of the pre-set conditions of the deal was that Bell Canada be recognized as a solvent business by a valuation firm, and KPMG International had been assessing the operator's solvency. That process, though, led to some friction and disagreements, as KPMG had advised Bell Canada recently that it didn't believe the operator "would meet, post-transaction, the solvency tests set out in the definitive agreement." (See BCE Turns to PwC.)

The purchasing consortium announced Wednesday night that Bell Canada had failed to pass one of KPMG's solvency tests. As a result the deal was called off, with the consortium stating that, under those circumstances, no termination fee was applicable.

Bell Canada's not having that, though. It says the termination of the deal was "invalid," and that it, not the consortium, is terminating the deal "in accordance with its terms, and will be demanding payment of the $1.2-billion break-up fee from the Purchaser."

In the meantime, Bell Canada says it's reinstating a fourth-quarter dividend, to be paid Jan. 15, 2009.

Bell Canada's share price is up $0.21, about 1.2 percent, to $18.50.

— Ray Le Maistre, International News Editor, Light Reading

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