Teachers’ fund agrees USD48.5 billion takeover of BCE

2 Jul 2007

Canada’s largest telecoms group BCE announced in a statement on Saturday that it has entered into a definitive agreement to be acquired by a consortium led by Teachers Private Capital, the private investment arm of domestic fund the Ontario Teachers Pension Plan (Teachers), and US funds Providence Equity Partners and Madison Dearborn Partners. The all-cash transaction is valued at CAD51.7 billion (USD48.5 billion), including CAD16.9 billion (USD15.9 billion) of debt, preferred equity and minority interests. The BCE board has agreed to the consortium’s offer, which has secured financing from a syndicate of banks. Teachers offered CAD42.75 cash per share, representing a 40% premium over the average trading price of BCE shares in the first quarter of 2007. If successful, the deal would be the biggest leveraged buyout in history, exceeding the USD43.2 billion takeover of Texas power utility TXU Corp by Kohlberg Kravis Roberts & Co and TPG Inc in February. Teachers and Providence have cooperated on nine acquisitions worldwide, including Denmark’s incumbent telco TDC and cable TV operator Kabel Deutschland.

According to TeleGeography’s GlobalComms database, Montreal-based BCE comprises telcos Bell Canada and Bell Aliant as well as other communications, media and IT activities. Bell Canada is the main incumbent operator of fixed line telephony services in Ontario and Quebec, whilst Bell Aliant is the incumbent in Atlantic Canada. Cellular division Bell Mobility provides nationwide mobile services, and other group businesses include small regional incumbent telcos Telebec, NorthernTel and Northwestel, western division Bell West, wholesale carrier operations, and Bell ExpressVu, one of Canada’s two national satellite television providers. BCE also holds a minority stake in Bell Globemedia, a holding company that includes The Globe and Mail newspaper, the CTV television network and several speciality TV channels. In December 2006 BCE sold its satellite services subsidiary Telesat Canada for CAD3.42 billion (USD2.96 billion) to Canada’s Public Sector Pension Investment Board and US-based Loral Space & Communications.

BCE is set to undergo a shake-up in the wake of the buyout, according to the CEO of Providence, Jonathan Nelson, who said: ‘For this investment to succeed, we have to grow the value of the company.’ BCE’s rival domestic telco Telus and other potential bidders may be discouraged from making a hostile bid by the CAD800 million break-up fee BCE has agreed to pay if the deal with Teachers is not completed.

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