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. On Dec. 11, all shares will be bought by Teachers’ Private Capital (the organization that actually invests the pension funds), along with affiliates of Providence Equity Partners Inc., Madison Dearborn Partners, LLC and Merrill Lynch Global Private Equity, who will respectively 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. Teachers agreed to buy BCE shares for $42.75 each, but as of Thursday, the shares were trading at $35.84. So if current shareholders are willing to sell at 84 per cent of what they should be able to get in a few weeks, they either need the cash badly or something is amiss. BCE will cost Teachers and its partners more than $52 billion, most of which they need to borrow. So they are depending on four major banks – Citigroup, Deutsche Bank, Royal Bank of Scotland and Toronto-Dominion Bank – to provide loans of about $30 billion. The banks said in June they were good for the money, but Citigroup recently announced it’s cutting 50,000 jobs and TD Thursday reported credit trading losses of $350 million for the quarter ending Oct. 31. TD is scheduled to release its quarterly figures December 4. None of the banks have announced they are pulling out of the deal. Though BCE faced some lawsuits from investors trying to block the deal, a Saskatchewan court last month rejected a request by two shareholders (who filed a class action suit) for an injunction to halt the privatization. But around the same time, bloggers such as Mark McQueen wondered whether the deal would be such a good idea. On Seeking Alpha, McQueen wrote: “How could it possibly be in the interest of shareholders at Citibank, Deutsche Bank, Royal Bank of Scotland and Toronto-Dominion Bank, essentially to force ‘Teachers’ to overpay for BCE? Attention bankers: A lack of common sense is what got the world into this credit mess, but there’s still time to repent and be smart about BCE.” If the Teachers-lead consortium decides to back out, it would owe BCE a breakup fee of $1 billion. Network World does not offer investment advice but we’re willing to bet the acquisition will go through. Though we are betting our reputation as industry soothsayers, we are not willing to bet money.

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