Will the Bell Canada Enterprises acquisition go through?

BCE is scheduled to be taken private next month by a consortium led by the Ontario Teachers’ Pension Plan.

OnDec. 11, all shares will be bought by Teachers’ Private Capital (theorganization that actually invests the pension funds), along withaffiliates of Providence Equity Partners Inc., Madison DearbornPartners, LLC and Merrill Lynch Global Private Equity, who willrespectively own 52, 32, nine and seven per cent respectively.

But not everyone seems to think the deal, originally inked in June, 2007, will go through.

Teachersagreed to buy BCE shares for $42.75 each, but as of Thursday, theshares were trading at $35.84. So if current shareholders are willingto sell at 84 per cent of what they should be able to get in a fewweeks, they either need the cash badly or something is amiss.

BCEwill cost Teachers and its partners more than $52 billion, most ofwhich they need to borrow. So they are depending on four major banks – Citigroup, Deutsche Bank, Royal Bank of Scotland and Toronto-DominionBank – to provide loans of about $30 billion.

The bankssaid in June they were good for the money, but Citigrouprecently announced it’s cutting 50,000 jobs and TD Thursday reportedcredit trading losses of $350 million for the quarter ending Oct. 31.TD is scheduled to release its quarterly figures December 4. None ofthe banks have announced they are pulling out of the deal.

ThoughBCE faced some lawsuits from investors trying to block the deal, aSaskatchewan court last month rejected a request by two shareholders(who filed a class action suit) for an injunction to halt theprivatization.

But around the same time, bloggers such as Mark McQueen wondered whether the deal would be such a good idea.

OnSeekingAlpha, McQueen wrote: “How could it possibly be in theinterest of shareholders at Citibank, Deutsche Bank, Royal Bank ofScotland and Toronto-Dominion Bank, essentially to force ‘Teachers’ tooverpay for BCE? Attention bankers: A lack of common sense is what gotthe world into this credit mess, but there’s still time to repent andbe smart about BCE.”

If the Teachers-lead consortium decides toback out, it would owe BCE a breakup fee of $1 billion. Network Worlddoes not offer investment advice but we’re willing to bet theacquisition will go through. Though we are betting our reputation asindustry soothsayers, we are not willing to bet money.

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Jim Love, Chief Content Officer, IT World Canada

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