BCE shares rise on takeover speculation

A powerful New York equity firm is stalking BCE Inc. in the hope of launching a friendly takeover bid, according to a newspaper report on Thursday.

Shares of communications conglomerate BCE Inc., the parent firm of Bell Canada, gainedsix per centon the TSX Thursday on reports that U.S. private equity firm Kohlberg Kravis Roberts is weighing a bid to take the company private.

The stock of BCE opened at $33.50, up 11 per centfrom the previous close. BCE finishedup $1.92 at $32.05.

At the request of TSX Market Regulation Services, BCEissued a statement, saying"there are no ongoing discussions being held with any private equity investor with respect to any privatization of the company or any similar transaction." BCE did not deny that talks had taken place in the past.

But BCE added that it has no current intention of pursuing discussions.

Based on Wednesday's closing price of $30.13 a share, BCE's total market capitalization is about $24.33 billion. Factoring in a takeover premium of 15 to 20 per cent, a takeover bid from KKR could be worthclose to $30 billion.

The Globe and Mail reported Thursday that KKR has had at least two meetings with top officials at BCE, including CEO Michael Sabia.

KKR wouldn't comment on the takeover speculation.

A bid from New York-based KKR would face numerous regulatory hurdles, including the foreign ownership rules that prevent non-Canadians from owning more than 46 per cent of the voting stake of a telecom firm.

The Globe and Mail reported that KKR is looking for Canadian partners, such as the Ontario Teachers' Pension Plan, which is already BCE's largest shareholder, with a five per cent stake.

If the KKR offer does proceed, it could be the biggest acquisition in Canadian corporate history and one of the biggest leveraged buyouts in the world. Leveraged buyouts rely heavily on debt to finance share purchases.

KKR, Teachers and BCE already have a business history. In 2002, KKR and Teachers teamed up to buy BCE's Bell Canada directories business for $3 billion. The Yellow Pages directory business wasspun off in 2004 as a publicly traded income trust.

Over the years, KKR also invested in other Canadian companies, including Shoppers Drug Mart in 2000 and Masonite International in 2005.

BCE rival Telussaw its stock price rise Thursday as investors bet on some kind of consolidation in the industry. Shares of Telus gained $1.53 to $59.20.