Huge BCE buyout hangs on Friday's court verdict

Thu Jun 19, 2008 4:32pm EDT
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By Randall Palmer

OTTAWA (Reuters) - The fate of the world's largest leverage buyout hangs in the balance ahead of Friday afternoon's decision by the Supreme Court of Canada on whether BCE Inc treated its bondholders unfairly in agreeing to a $34.8 billion ($34.5 billion) takeover.

The country's top court will make its decision with unusual speed, only three days after an oral hearing on whether to let a consortium of Canadian and U.S. investors proceed with the buyout of Canada's largest telecom company.

Legal experts said the quick turnaround, and the fact that the media won't get an advance look at the ruling before the public announcement, suggests a straight up-or-down decision, with written reasons provided only at a later date.

"I highly doubt they'll give reasons. It's such a complicated case," said Anita Anand, a law professor at the University of Toronto.

Billions of dollars of shareholder value is at stake in the decision. The value of BCE's existing bonds is also at risk, the debtholders say, having challenged the deal on the grounds that it would entail the assumption of too much new debt, devaluing their securities.

Ontario Teachers' Pension Plan, with U.S.-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity, are offering C$42.75 a share to take BCE, parent of Bell Canada, private.

BCE shares rose slightly after Tuesday's hearing, with investors judging that the bondholders got the toughest questions from the Supreme Court, but were still only C$34.68 on Thursday afternoon, down 37 Canadian cents from Wednesday.

That is partly because of uncertainty about which way the court will rule and partly because investors are aware of the challenges of concluding the deal even if the court rules in favor of BCE and the investors who want to take it private.   Continued...

<p>A telephone booth and company sign are seen outside the offices of BCE Inc., Canada's largest telecoms group, in Montreal, May 21, 2008. REUTERS/Shaun Best</p>