The future of the $35 billion privatization of Bell Canada parent BCE Inc. could be decided by the Supreme Court of Canada as early as this week, according to a law professor.
Allan Hutchinson of York University’s Osgoode Hall law school said in an interview Tuesday that the court can do whatever it wants in terms when it makes its ruling in the extraordinary case.
The court reserved its decision. Often that means its rulings will be delivered in months. More likely, Hutchinson said, is that the court will issue its decision either today or Thursday.
While many applicants like to hint that their case is of national importance and a speedy decision would be appreciated, the Supreme Court refuses to be hurried. That’s true even in this case, where the Ontario Teachers Pension Plan — BCE’s largest shareholder, which, along with other partners has offered to buy BCE for $42.75 a share — has said it would like to have the deal sealed by June 30.
However, Hutchison noted that the Supreme Court felt the issue was important enough to schedule yesterday’s unusually speedy hearing – the Quebec appeal court ruling came only last month – suggesting its decision will be quick.
The heart of the case is the part of the billion-dollar deal touching Bell Canada bondholders, who are suing BCE. The deal loads BCE with debt, thus lowering the value of their bonds. The bondholders believe BCE’s board of directors gave more consideration to making a good deal for shareholders and gave them short shrift.
In court, BCE is arguing the only thing owed to bondholders is the terms of their contracts. A Quebec trial court disagreed, but the provincial appeal court sided with the bondholders.
If upheld by the Supreme Court, the terms of the Teachers’deal would be tossed out. In theory, the BCE board could come up with new arrangements to satisfy the bondholders, but some financial observers suggest there isn’t much more money lying around.
Just as importantly, there are news reports that the financial institutions that will fund the $35 billion the Teachers consortium will need for the buy-out have wanted to re-negotiate the terms since the U.S. stock market went shaky some six months ago.
Combined, these two negotiations could permanently unwind the deal.
Should the Supreme Court decide to overturn the Quebec appeal court decision, it doesn’t necessarily mean the Teachers deal has a green light. The reasons the Supreme Court gives will be examined under microscopes by the bondholders and the banks to see if there’s any leverage room for them.
The case, of course, is of great interest to those involved with mergers and acquisitions of publicly-traded companies, for it involves defining the responsibilities of boards of directors.
However, buyers of Bell’s telecommunications services are also watching closely. The troubled telco, under pressure for shareholders to take action for what they perceive as an under-performing stock, has put off a number of decisions about its future in the past year while the buy-out has been assembled. Teachers wants to take BCE private so it can sort out the company’s problems away from daily shareholder pressure. Presumably it would then take a newly-refreshed BCE back to the stock market.
These decisions include which services it will abandon, which new technologies it will embrace and which, if any, divisions or subsidiaries it will sell. When the Teachers’ deal was being finalized industry analysts discussed some of those choices. They also include pressure to adopt IPTV to fully embrace the challenge from cable companies that have moved into the residential and corporate telephone business.
Bell Mobility might also be mulling over switching its network from the less common CDMA standard to the more popular GSM. There are persistent rumors that Telus will soon go that route.
Both of these decisions will involve hefty amounts of money.
Last fall, industry analysts suggested in interviews ways they thought Teachers should overhaul Bell.