BCE takeover details still being thrashed out

20 May 2008

The proposed leveraged buyout of BCE, parent of Bell Canada and Bell Aliant, is still incomplete as a group of banks are continuing to put pressure on the buying consortium to restructure the terms of their lending agreement, reports Globeandmail.com. The lenders, including Citibank, Deutsche Bank and Royal Bank of Scotland, have reportedly ‘grown nervous’ due to the extent of their financial commitments in an uncertain credit environment, and adopted more aggressive negotiating tactics on Friday, by pushing the buyers to reduce the purchase price and agree to more favourable loan interest rates. So far, however, none of the banks has threatened to walk away from the table and potentially derail the deal, added sources close to the matter. BCE is undergoing a CAD51.7 billion (USD51.9 billion) cash and debt buyout by a consortium of funds led by the Ontario Teachers’ Pension Plan (Teachers). The group also includes equity houses Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity as well as Toronto-Dominion Bank. With the 30 June completion deadline looming, the friction between the banks and the acquirers has fuelled concerns that the buyout could fall apart. Reports that the takeover could be in jeopardy sent BCE’s stock price on the NYSE tumbling on Monday by USD2.19 to USD36.62 – well below the offer price of USD42.93 (at today’s CAD-USD exchange rates). ’I cannot comment on discussions with the banks or the company, but we expect everyone will honour their commitments,’ said Jim Leech, chief executive officer of Teachers. BCE announced on Monday that it had received formal confirmation from the Canadian Radio-television and Telecommunications Commission (CRTC) that it has met the regulator’s conditions for the deal to proceed ‘with two minor exceptions’ and added that it still expects the deal to close by the end of June. However, according to Globeandmail.com, that may not be the final deadline for the buying group to secure its financing. The credit agreement between the buyers and their lenders allows room for negotiations to continue past that date, requiring financing to close by November, a source said Monday. BCE also has an agreement with the buying group that says the financing should be in place by 30 June, but allows the financing date to be extended.