Providence Equity in $48.9B winning bid for BCE

Investors led by the Ontario Teachers’ Pension Plan and Providence Equity Partners beat out rival bidders for Montreal-based BCE Inc., Canada’s biggest telephone company and most widely held stock, in the largest leveraged buyout bid ever, Bloomberg News said. The consortium agreed Saturday to pay $32.3 billion ($34.2 billion Canadian); counting about $16 billion in debt, plus preferred shares and minority interests, the deal is valued at about $48.9 billion.

Ontario Teachers,’ which already owns 6.3 percent of BCE, would end up with 52 percent of the equity in BCE; Providence Equity, 32 percent; Madison Dearborn Partners LLC of Chicago, 9 percent; and unidentified Canadian investors the remaining 7 percent. Their per-share bid of $42.75 Canadian represents a 6-percent premium on BCE’s Friday closing price and 42 percent above its share price on March 28, the day before the possibility of a sale was first reported.

“At the end of the day, we decided to go with less leverage than maybe we had been thinking three weeks ago,” Jim Leech, the pension fund’s senior vice president, told Bloomberg yesterday, citing turbulence in the credit markets. The partners increased the equity portion of the transaction to $7.5 billion, half from Ontario Teachers’ fund. Leech declined to say how much equity the fund originally had planned to invest. Arranging debt financing is a group of banks including Citigroup Inc., Toronto-Dominion Bank, Deutsche Bank AG and Royal Bank of Scotland Group Plc.

The deal is expected to close in the first quarter of 2008, pending regulatory approvals and the approval of at least two thirds of BCE shareholders, the phone company said. It includes a breakup fee of $800 million Canadian payable by BCE and a reverse breakup fee of $1 billion Canadian payable by Teachers. Details of what would trigger those fees were not disclosed, nor were details of the rival bids from investor groups led by the Canada Pension Plan Investment Board and Cerberus Capital Management LP. A fourth bidder – Vancouver-based Telus Corp., Canada’s No. 2 phone company, which would have financed the purchase with cash and stock – entered the bidding June 21 and dropped out June 25.

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Providence Equity Partners Inc. is a global private investment firm based in Providence, with offices in New York City and London, that specializes in media, entertainment, communications and information companies. It has raised $21 billion through seven funds since its founding in 1989. Additional information is available at www.provequity.com.

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