Canadian pension plan wins telecom bid

Canadian pension plan wins telecom bid

	Published : Sat, 30 Jun 2007 21:40 By : Agencies Print this Story

TORONTO (AP) - Bell Canada agreed Saturday to be bought by a private partnership led by the Ontario Teachers Pension Plan in a deal valued at C$51.7 billion (US$48.5 billion) that would be the largest leveraged buyout ever.

The deal to take Canada's largest telecommunications company private, if approved by shareholders, would also be the largest takeover ever in Canada.

The Ontario Teachers Pension Plan Board, the U.S.-based Providence Equity Partners and Madison Dearborn Partners, LLC would buy BCE Inc. for C$51.7-billion which includes the assumption of C$16.9-billion (US$15.9 billion) worth of debt, preferred equity and minority interests, BCE said.

The Toronto-based pension plan -- with assets of C$106 billion (US$99 billion) in 2006 -- invests and administers the retirement funds for Ontario's 167,000 teachers and 104,000 retired teachers.

The pension plan was BCE's largest shareholder with a 6.3 percent stake.

Jim Leech, senior vice-president of Teachers' Private Capital, the investment wing of the pension plan, said this deal is larger than the February purchase of energy provider TXU Corp. by a consortium of buyout shops for a record $45 billion.

'This is bigger than that, but that's not why we bought it,' Leech told The Associated Press in an interview. 'It's a bit daunting.'

Leech said the plan has been a major BCE shareholder since the early 1990s.

Michael Hlinka, an independent financial analyst, called the deal unique because it involves a leveraged buyout by a private partnership of a huge public company.

'The system worked in that Bell shareholders were not happy with the current management and ... the way the company was run,' and were able to receive a substantial premium over the share price, Hlinka said.

The investor group will acquire all of the common shares of BCE not already owned by Teachers for an offer price of C$42.75 per common share. The stock traded at C$31.33 at the start of the year and has been as low as C$25.32 in the last year. It closed at C$40.34 on Friday.

Hlinka said that for the amount being offered by Teachers, the new owners will have to improve BCE's earnings to make the deal beneficial.

BCE Chairman Richard J. Currie said the deal provides great value for shareholders.

'We were charged with managing one of the world's largest private equity transactions, certainly the largest in this country,' Currie told reporters in a conference call. 'We had to do it within the relatively small market of Canada and we had to cope with foreign ownership restrictions which capped participation of non-Canadian companies at 47 percent equity.'

BCE chief executive Michael Sabia said the offer is a 40 percent premium over the average price for BCE shares over the past year.

'This is a huge amount of value delivered to our shareholders,' he said on the same conference call.

The group led by the pension plan won out several other bidders including New York-based Cerberus Capital Management LP with billionaire Hong Kong-based Canadian citizen Richard Li's Pacific Century Group, and the Canada Pension Plan Investment Board with backing from American buyout firm Kohlberg Kravis Roberts & Co.

Telus, Canada's second-largest telecom company, pulled out of the bidding last Tuesday.

The deal will require approval from shareholders as well as federal government regulators. Leech said BCE's headquarters will remain in Montreal.

BCE, which has more than 54,000 employees, had annual revenue of $C17.7 billion (US$16.4 billion) in 2006. It has 18.2 million customer connections, including 5.8 million wireless subscribers, 8.64 million phone lines, 1.94 million internet subscribers and 1.82 million satellite television subscribers. Other BCE holdings include interests in CTVglobemedia, one of the biggest Canadian media companies that owns the Globe and Mail newspaper and CTV television.