BCE has reached a final agreement with the buyout consortium led by the Ontario Teachers’ Pension Plan in a $52 billion deal, the largest leveraged buyout in history.
The agreement includes “fully negotiated and executed credit documents for the purpose of funding the transaction,” at a purchase price of $42.75 per share
Teachers’ director of communications Deborah Allan says that while the pension plan has been committed to seeing the deal finalized, they are relieved at today’s news. “There’s a positive note in the air,” she says. “We’re just glad to be in the home stretch.”
In a statement, BCE explained that the final agreement was approved after considering fairness options regarding common shares. “The final agreement, with definitive financing now in place, preserves the $42.75 per common share price announced last June, which the board believes is very much in the best interest of shareholders, the company and Bell Canada, particularly given current capital market conditions,” said BCE board chair Richard Currie.
Rumours of a lack of financial backing from a group of banks due to the ongoing credit crunch had investors nervous over the past few months, leading to speculation that the deal would fall through.
The group, which will provide $34 billion in financing, includes Citigroup, Deutsche Bank, Royal Bank of Scotland and TD Securities.
Analysts say the banks may have been mollified by an amendment to the agreement stipulating that BCE will withhold dividend payments on common shares until the transaction closes, while continuing to pay dividends on its preferred shares. The extension of the closing date from the end of the third quarter to Dec.11, 2008 is also seen as a gesture to the banks, giving them time to raise capital.
A potential dealbreaker was avoided in June when the Supreme Court of Canada overturned a lower court’s decision to block the deal at the behest of a group of bondholders who claimed that BCE’s privatization was unfair to them.
Another change to the agreement involves the reverse break fee payable to it by the purchasers in the event the deal collapses, which has been increased to $1.2 billion from $1 billion.
BCE’s shares jumped more than 12% on the news.
For more about the deal, click here to visit our special online section, The Rise of Private Equity.
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