CANADA STOCKS-Clouds over BCE deal pull TSX lower

Wed Nov 26, 2008 10:09am EST
 
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* BCE deal in doubt, shares drop 37 percent

* Energy group ekes out small gain as oil price rises

TORONTO Nov 26 (Reuters) - The Toronto Stock Exchange's main index fell in early dealings on Wednesday as the big leveraged buyout of BCE (BCE.TO: Quote) looked to be in doubt, while a gloomy corporate and economic outlook weighed on sentiment.

Takeover target BCE Inc (BCE.TO: Quote) sank more than 37 percent to C$24.15 as the company said the world's largest leveraged buyout may be in jeopardy. BCE said that it was unlikely to close the C$34.8 billion deal after its accountants ruled the telecom giant, which owns Bell Canada, wouldn't meet a solvency test after the deal because of the huge debt load it would take on. [ID:nN26331920]

The news dragged the telecoms group down more than 11 percent. BCE's main rival Telus (T.TO: Quote) was down 5 percent at C$36.90.

Shortly after 9:55 a.m. (1455 GMT), the S&P/TSX composite index .GSPTSE was down 1.5 percent, or 130.02 points, at 8,312.84. Five of the index's main 10 groups were lower. But five sectors advanced, including the heavyweight energy and materials groups, which helped the index trim early losses.

The energy group edged up 0.2 percent, tracking the price of oil. Crude was above $52 a barrel, bouncing back from a near 7 percent decline in the previous session, ahead of weekly U.S. oil stocks data that will help investors gauge the strength of demand in the world's top energy consumer. [ID:nSP373462]

($1=$1.24 Canadian) (Reporting by Ka Yan Ng; editing by Peter Galloway)