A consortium comprising Teachers Private Capital, the private investment arm of the Ontario Teachers Pension Plan, Providence Equity Partners and Madison Dearborn Partners have reached agr
A consortium comprising Teachers Private Capital, the private investment arm of the Ontario Teachers Pension Plan, Providence Equity Partners and Madison Dearborn Partners have reached agreement to acquire BCE, the telecommunication group that operates under the Bell Canada brand, for a total of CAD51.7bn (USD 48.5bn). The deal is the largest buyout transaction in Canadian history.
The BCE board is unanimously recommending that shareholders accept the offer of CAD42.75 per share, which represents a premium of 40 per cent over the ‘undisturbed’ average trading price of the company’s shares in the first quarter of 2007, before the possibility of a buyout transaction surfaced publicly.
BCE is Canada’s largest communications company, offering local, long-distance and wireless phone services, high-speed and wireless internet access, IP broadband services, information and communications technology services (and direct-to-home satellite and VDSL television services to residential and business customers in Canada.
The all-cash transaction, which is expected to close in the first quarter of next year, includes CAD16.9bn (USD15.9bn) in debt, preferred equity and minority interests. The purchase price values BCE at 7.8 times earnings before interest, taxes, depreciation and amortisation for the 12 months to the end of March.
‘The proposed transaction concludes a comprehensive and disciplined review of the company’s strategic alternatives launched April 17,’ says BCE chairman Richard J. Currie. ‘It will deliver substantial value creation for our shareholders. In addition, a majority of the equity will be owned by Canadians.’ The deal would give Teachers Private Capital 52 per cent of the company, Providence 32 per cent, Madison Dearborn 9 per cent and other Canadian investors 7 per cent.
‘The transaction delivers to our shareholders the economic benefit of the work done to focus on our core business and to strengthen Bell with a new cost structure and new competitive capabilities,’ said BCE chief executive Michael Sabia. ‘All members of the investor group have outstanding track records in building strong and resilient enterprises, and they share our commitment to customers, our employees and the communities we serve.’
Teachers has been a major BCE shareholder since the early 1990s. ‘The board has recognised our commitment to BCE’s ongoing growth potential, through our proposed investment strategy,’ says Jim Leech, senior vice-president of Teachers’ Private Capital.
‘We made it clear that we have carefully considered the potential for BCE and its ongoing status as a Canadian icon. We strongly believe that all BCE shareholders, Canadian consumers and employees, including senior management, who will continue to direct the company from its headquarters in Montreal, will benefit from this transaction.’
Adds Providence chief executive Jonathan M. Nelson: ‘This is a unique opportunity to contribute to and participate in the growth of one of the world’s most significant communications companies. BCE offers state of the art services through its sophisticated network that extends throughout Canada.’
The transaction includes a break-up fee of CAD800m (USD751m) that would be payable by BCE a reverse break-up fee of CAD1bn payable by the consortium. The transaction will be completed through a plan of arrangement, which will require the approval of two-thirds of outstanding common and preferred shares, voting as a class.
Legal advisors to BCE are Davies, Ward Phillips & Vineberg, Stikeman Elliott, and Sullivan & Cromwell. The bid process was led by Goldman Sachs, while BMO Capital Markets, CIBC Capital Markets and RBC Capital Markets also acted as financial advisors to the company. Greenhill provided independent advice to the strategic oversight committee of the BCE board, which received fairness opinions on the price to be paid for common and preferred shares from the company’s financial advisors.
Legal advisors to the investor group are Weil, Gotshal & Manges and Goodmans. Citi is serving as lead mergers and acquisitions advisor to the consortium, and other financial advisors include Deutsche Banc, Royal Bank of Scotland and TD Securities.
With more than CAD16bn in assets, Teachers’ Private Capital is one of North America’s largest private investors, providing equity and mezzanine debt capital for large and mid-sized companies, venture capital for developing industries, and financing for a growing portfolio of infrastructure and timberland assets worldwide. The CAD106bn Ontario Teachers’ Pension Plan is the largest single-profession pension plan in Canada, responsible for investing the fund and administering the pensions of Ontario’s 271,000 active and retired teachers.
Providence Equity Partners specialises in equity investments in media, entertainment, communications and information companies around the world. The principals of Providence manage funds with approximately USD21bn in equity commitments and have invested in more than 100 companies operating in over 20 countries since the firm’s establishment in 1989. The firm has its headquarters in Providence, Rhode Island, and offices in New York, London, Hong Kong and New Delhi.
Chicago-based Madison Dearborn Partners has more than USD14bn of equity capital under management and makes new investments through its most recent fund, Madison Dearborn Capital Partners V, a USD6.5bn fund raised last year. Over the past 20 years, the firm’s principals have completed over 200 investments in sectors including basic industries, consumer, energy and power, financial services, health care and real estate as well as communications and media.
