BCE buyout collapses

Reuters reports that the proposed CAD34.8 billion (USD27.8 billion) cash and debt buyout of Canada’s biggest telecoms group BCE collapsed this morning after the purchasing consortium said that a key solvency condition for the deal could not be met. The statement followed an auditor’s report from KPMG late last month that warned the buyout would cause the resultant company to fail a solvency test because of its huge debt load. BCE, parent of Bell Canada and Bell Aliant, agreed to be bought out by a consortium led by its largest shareholder, the Ontario Teachers’ Pension Plan, including US-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity, in June 2007. One of the conditions to closing the deal was receipt of a solvency opinion from a nationally recognised valuation firm (with KPMG subsequently chosen the following month). In today’s statement, the main consortium partners said they terminated the agreement because KPMG had concluded that ‘a required test for the solvency opinion was not met’, and added that under these circumstances ‘neither party owes a termination fee to the other.’