Canada's top court to hear BCE appeal on buyout

Mon Jun 2, 2008 5:19pm EDT
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By Randall Palmer

OTTAWA (Reuters) - The Supreme Court of Canada agreed on Monday to hear an appeal by BCE Inc. of a lower court decision that threatens to derail its C$34.8 billion ($34.8 billion) buyout.

Canada's biggest telecoms company, parent of Bell Canada, will now be allowed to contest the lower court decision, which said BCE did not take the interest of its bondholders into account when it backed what would be the world's largest leveraged buyout.

The Supreme Court set June 17 as the date for BCE and the bondholders to make their oral arguments, ahead of the buyout plan's June 30 deadline for court approval.

The price of BCE's U.S.-listed shares jumped to $35.30 in after-hours trading in New York immediately after the announcement. They had closed at $34.53 in consolidated U.S. trade.

In Toronto, BCE shares closed at C$34.65 before the court announced its decision. This is well below the C$42.75 a share price offered in the buyout plan as markets have been uncertain over whether the buyout will be completed.

If the court had declined to hear the appeal, the bondholders automatically would have won and could then have hoped for some concessions from Bell Canada to bring them on side.

But even though its decision to hear the appeal was a tactical victory for BCE, this was not a reliable indicator of which way the court might rule. If, for example, the court agrees with the bondholders, it still might want to hear the case so it can write clear principles to guide corporate boards in the future.

Chief Justice Beverley McLachlin and Justices Louis LeBel and Louise Charron constituted the three-judge panel which decided on hearing the appeal. As is usual, they gave no reasons.   Continued...

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