BCE buyout gets go-ahead from Canada's high court

Fri Jun 20, 2008 6:31pm EDT
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By Randall Palmer and Wojtek Dabrowski

OTTAWA/TORONTO (Reuters) - BCE Inc., Canada's largest telecom company, won the backing of the country's Supreme Court on Friday to proceed with the world's biggest leveraged buyout, but financing could still trip up the deal.

The high court overturned a Quebec Court of Appeal decision which had said the C$34.8 billion ($34.1 billion) plan, to be funded partly by taking on new debt, did not take adequate account of the interests of existing bondholders.

"The decision of the court of appeal is set aside," the Supreme Court said in its unanimous judgment, without giving reasons.

It was a stunning victory for BCE, parent of phone company Bell Canada. Analysts said the ruling would make BCE shares jump closer to the C$42.75 being offered by the buyout group led by the Ontario Teachers' Pension Plan.

Before the Quebec court decision on May 21, BCE stock had traded at C$37.12 a share. That was well below the offer price because of uncertainty that the deal would be completed as planned. The shares closed at C$34.60 on Friday on the Toronto Stock Exchange just before the Supreme Court ruling.

"It's a pro-transaction position," Marshall Sonenshine, chairman of New York-based investment bank Sonenshine Partners, said of the ruling. "It favors the ability to do a deal that is in the interests of shareholders, even if it impairs credit-worthiness, and bondholders need to be aware of that."

BCE's New York-listed shares rose 8.8 percent to $37.10 in extended trade as investors digested the late-afternoon ruling.

'NOT OUT OF THE WOODS'   Continued...

<p>A telephone booth is seen outside the offices of BCE Inc. in Montreal, June 20, 2008. REUTERS/Shaun Best</p>