UPDATE 3-Canada's BCE to take Bell Aliant private in $3.7 bln deal

Wed Jul 23, 2014 12:25pm EDT
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(Recasts with context on competition, cash flow for dividend. Adds portfolio manager and analyst comment)

By Euan Rocha and Alastair Sharp

TORONTO, July 23 (Reuters) - BCE Inc said on Wednesday it will pay C$3.95 billion ($3.68 billion) to take regional affiliate Bell Aliant private, securing access to its cash flow and bolstering BCE's position as Canada's largest telecom company.

The deal for the 56 percent of Bell Aliant that BCE doesn't already own comes as the telecom industry braces for the possible emergence of a fourth national wireless company, a key goal of the federal government's telecom policy.

"This makes sense given that the regulators are looking to fight consolidation at every turn," said Ryan Bushell, a portfolio manager at Leon Frazer, which holds shares in both companies. "It makes sense to bring it all up to the bottom line for BCE, and it helps support their dividend."

BCE's move should protect its dividend growth profile for another year or two even if its wireless business is hit by competitive turbulence, Desjardins analyst Maher Yaghi said in a note.

Montreal-based BCE said the deal will save the combined companies C$100 million a year in costs, partly due to the elimination of duplicate public company costs.

While Bell Aliant's main operations are in Atlantic Canada, the deal also broadens BCE's prospective customer base in some areas of rural Ontario and Quebec.

BCE said the deal values Bell Aliant at C$31 a share, a premium of 10 percent to the stock's close on Tuesday. It expects to close the deal by late November.   Continued...