Shares of Canada's largest communications company BCE Inc. (BCE) rose Monday morning on news that it has entered a final agreement with a buyer group led by the Ontario Teachers' Pension Plan to complete the C$35 billion buyout deal struck last June.
The stock was up about 11%, climbing $3.99 to $38.74 per share by 10:50 am Eastern Time. Shares of the Montreal, Quebec-based company reached their highest level since mid-May.
Under the final agreement that amends the definitive agreement signed in June 2007, the purchase price remains at C$42.75 per share but the closing of the deal is delayed until December 11.
Also, the final agreement increases the reverse break fee from C$1 billion to C$1.2 billion to be paid by the purchasers if the deal falls through and prevents BCE from paying dividend on its common shares. However, it allows the company to continue to pay dividends on its preferred shares.
Additionally, the purchasers and the lenders have executed a credit agreement and other key financing documents for the purpose of funding the deal. The deal is being financed by Citigroup, Deutsche Bank, Royal Bank of Scotland and TD Securities, a unit of Toronto-Dominion Bank.
BCE said its board of directors has approved the final agreement after considering, among other things, fairness opinions regarding the purchase price.
The board of directors of BCE also confirmed George Cope, President and Chief Operating Officer of Bell Canada since October 2005, as the next Chief Executive Officer of BCE and Bell Canada, effective July 11. He will succeed the current incumbent Michael Sabia.
"The final agreement, with definitive financing now in place, preserves the $42.75 per common share price announced last June, which the Board believes is very much in the best interest of shareholders, the company and Bell Canada, particularly given current capital market conditions," said BCE and Bell Canada Board Chair Richard Currie.
The announcement ended speculation about the funding for the deal and clears doubt whether the price would have to be lowered.
By keeping to the original C$42.75 per share purchase price, BCE avoided the embarrassment of asking shareholders to approve the deal again and repeating the lengthy judicial and regulatory processes in Canada to clear the deal.
In June 2007, just before the onset of the North American credit crisis, an investor group led by Teachers' Private Capital, the private investment arm of the Ontario Teachers' Pension Plan, Providence Equity Partners Inc., Madison Dearborn Partners, LLC and Merrill Lynch Global Private Equity agreed to buy BCE for C$35 billion. Including debt and accounting for currency fluctuations, the deal is valued at about C$52 billion, making it the largest leveraged buyout ever.
BCE shareholders overwhelmingly approved the deal in September. The company has secured all third party approvals prior to the June 30 deadline set out in the original agreement.
The deal appeared to be in jeopardy as early as last month after a Canadian appeals court struck down the transaction, ruling that BCE did not treat its bondholders fairly. Weeks later, the Supreme Court of Canada reversed the lower court's decision and allowed the deal to proceed.
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