Pension Plan Buyout of Bell Canada Would Set Record
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Sunday, July 1, 2007
TORONTO, June 30 -- Bell Canada agreed Saturday to be bought by a private partnership led by the Ontario Teachers Pension Plan in a deal valued at $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 and the U.S.-based Providence Equity Partners and Madison Dearborn Partners would buy BCE for $48.5 billion, which includes the assumption of $15.9 billion worth of debt, preferred equity and minority interests, said Bell Canada's parent company, BCE.
The pension plan -- with assets of $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.
James Leech, senior vice president of Teachers' Private Capital, the investment arm of the pension plan, said this deal is larger than the February deal to buy energy provider TXU by a consortium of buyout shops for $45 billion.
"This is bigger than that, but that's not why we bought it," Leech said in an interview. "It's a bit daunting."
Leech said the plan has been a major BCE shareholder since the early 1990s.
BCE chief executive Michael J. Sabia said the offer is a 40 percent premium over the average price for BCE shares over the past year.
The group led by the pension plan won out over several other bidders including New York-based Cerberus Capital Management with billionaire Hong Kong-based Canadian citizen Richard Li's Pacific Century Group, and the Canada Pension Plan Investment Board with backing from U.S. buyout firm Kohlberg Kravis Roberts.
Telus, Canada's second-largest telecom company, pulled out of the bidding 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 revenue of $15.2 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.
