BCE takeover is a go, telecom company says
Last Updated: Friday, July 4, 2008 | 11:52 AM ET
CBC News
Telecom giant BCE Inc. says the $51.7-billion takeover of the company is a done deal.
The company said Friday that it has a final agreement with the takeover group headed by the Ontario Teachers' Pension Plan, which will take the iconic company — operator of the Bell phone system — private.
The deal maintains the original takeover price of $42.75 a share.
BCE stock had been trading more than $7 below the offer price because of doubts about the viability of the deal. It gained strength on Friday, rising $4.49, or almost 13 per cent, to close at $39.64.
"The signing of this agreement to take the company private in the largest transaction of its kind in the world, at $42.75 per common share, is the final chapter in a strong stewardship that has created substantial value for shareholders," chairman Richard Currie said.
The teachers' group and bankers lending billions to fund the deal for the Montreal-based company "have delivered fully negotiated and executed credit documents for the purpose of funding the transaction, including an executed credit agreement and other key financing documents," the company said in a news release.
There has been much speculation that the bankers would demand changes to the terms, originally reached in June 2007. Since then, the turmoil in credit markets has forced major changes to a number of leveraged buyouts, deals like the BCE purchase where borrowed money is a key source of financing.
None of the parties involved have revealed the terms of the bank loans, but analyst Ross Healey, chairman of Strategic Analysis Corp., said he suspected some arrangement was made to ease the bankers' concerns.
"The devil's in the details and we don't know what the details are," he told CBC News.
BCE said there have been several changes to the original terms:
- Closing has been delayed to sometime before Dec. 11.
- The company must not pay any common dividends before closing; it has already held up one dividend (36.5 cents a common share) saving $294 million, and will now miss the third-quarter payment.
- The break fee, payable by the buyers to BCE if they end the deal, has been increased to $1.2 billion.
CEO Michael Sabia will leave the company, as announced last year.
"With the signing of the final agreement and with funding for the transaction contractually committed, I am pleased to say that work is now largely done," he said.
George Cope, president and chief operating officer of Bell Canada since late 2005, will become CEO of BCE and Bell on July 11.
BCE said that with the takeover plans completed, the company will now focus on Bell's operations and the preparations for its privatization.
Teachers' partners are a group of U.S. investors: Providence Equity Partners Inc., Madison Dearborn Partners LLC and Merrill Lynch Global Private Equity.
"We are very pleased to have reached agreement with BCE and that our banks continue to support the transaction," the buyers said in a release.
The lenders include Citi, Deutsche Banc, Royal Bank of Scotland and TD Securities.
The deal was challenged by bondholders, who fought it all the way to the Supreme Court of Canada. The top court approved it on June 20, removing one substantial barrier.
