BCE shares dive as court ruling puts deal in doubt

Thu May 22, 2008 6:42pm EDT
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By Wojtek Dabrowski

TORONTO (Reuters) - BCE Inc (BCE.TO: Quote) (BCE.N: Quote) shares fell 12 percent on Thursday on fears that a Quebec court ruling could kill its C$34.8 billion ($35.2 billion) buyout by a group of investors led by the Ontario Teachers' Pension Plan.

The Quebec Court of Appeal late on Wednesday sided with debtholders who had complained the transaction -- the world's largest leveraged buyout -- was unfair.

The court said BCE, Canada's biggest telecom company, failed to prove the buyout could have been structured to provide a satisfactory price for the company's shares while avoiding an adverse effect on the debenture holders.

The company has filed a motion with Canada's Supreme Court for a fast-track appeal of the Quebec ruling, and said the timing of the deal's close hangs on that decision.

BCE shares tumbled C$4.48 to C$32.64 on the Toronto Stock Exchange and fell $4.73 to $33.10 in New York. As more than 26 million shares changed hands in Toronto, the exchange halted trading in the stock because of "data integrity concerns."

The TSX later said it had resolved a "trading message protocol issue" and expected trading in BCE shares to open as usual on Friday morning.

The Quebec court ruling came days after reports that the banks financing the buyout were trying to renegotiate terms, also raising uncertainty.

"In our view, the power in the negotiation between BCE/purchasers and the banks has just shifted significantly in favor of the banks," National Bank Financial analyst Greg MacDonald wrote. "In addition, the bondholders will not be satisfied unless they are paid in full."   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>