In a move that surprised no one, BCE Inc. filed a statement of claim inQuebec Superior Court alleging its would-be buyers owe the telco a $1.2billion breakup fee.
Published reports today indicated BCEclaims the Ontario Teachers Pension Plan’s decision to terminate theleveraged buyout “was directly related to both the burden of the loanfinancing arranged by the defendants and a deterioration in the globalmarket conditions …”
But when it announced the night of Dec. 10itwas backing out of the deal, Teachers said: “The Purchaserterminated the agreement in accordance with its terms. Under thesecircumstances neither party owes a termination fee to the other.”
Theacquisition of BCE by Teachers and three other companies –ProvidenceEquity Partners Inc., Madison Dearborn Partners, LLC and Merrill LynchGlobal Private Equity – was originally scheduled to close Dec. 11.
Thedeal, initially inked in June, 2007, called for the four organizationsto buy all shares of BCE at a price of about $50 billion. To do this,they would have had to borrow $30 billion, and four banks agreed topony up the cash.
But on Nov. 25, BCEannounced its auditor, KPMG, told the company it did “notexpect to be in a position to deliver … Dec. 11 .. an opinion that BCEwould meet the solvency tests” required to close the acquisition.Though KPMG would not give details to IT World Canada, analysts havespeculated BCE’s defined-benefit pension plans and the additional $30billion it would owe under the takeover agreement would make it harderfor the company to pay its bills.
BCE hinted on Dec. 11 it wouldsue Teachers. In a press release that day, the telco said it “disputesthat the Purchaser was entitled to terminate the Definitive Agreement,as such notice was delivered prematurely, prior to the outside date forclosing of the transaction, and therefore invalid.”BCE added it “will be demanding payment of the $1.2-billion break-up fee …”
IfBCE does manage to extract $1.2 billion from Teachers, will it give aprice break to customers? Build new infrastructure perhaps? Don’t counton it.