Bell Canada Agrees to Purchase by Ontario Teachers

Teachers' Pension Fund to Buy BCE for C$51.7 Billion

The Ontario Teachers Pension plan and a group of other investors, yesterday morning, according to Reuters, reached a deal to take over the largest Canadian telecom company, Bell Canada (BCE) with an all cash offer of $51.7 billion (Canadian) or just over 7.5 times operating profit. Teachers' Private Capital, the private investment company of the pension plan was the successful bidder with a bid 40% above trading in March when rumors of the company's availability began in March.

Teachers' Private Capital would hold a 52% stake in the company with two American private equity companies having a 41% stake between the two of them. Undisclosed Canadian investors would hold the remaining equity. The deal would make BCE a privately held company and would be the largest corporate takeover in Canadian history if it is successful in winning BCE shareholder and federal approval.

The Pension plan had reported assets of almost $100 billion in 2006, administers pension funds for over 165,000 Ontario teachers and already holds more than 6% of BCE.

There was a higher offer by Cerberus of $44 a share, compared with the Teachers' $42.75, but it was a cash and stock deal that the stock was in a highly leveraged firm. Bell ultimately focused on the cash offers. Cerberus has recently purchased the Chrysler group from Daimler Chrysler.

Another potential buyer, Telus, could be willing to up their offer to a $44 range, but it could be difficult to justify to their own shareholders. Telus is a Western Canadian telecom company which, should the Canadian government lift restrictions on foreign ownership of telecommunications companies, would likely be a target of acquisition itself. Telus reportedly pulled out of the running for BCE earlier in the week on complaints about the bidding rules.

Other than the natural complications in dealing with Telus, as direct competitor, BCE insisted the bidding rules had been fair.