The deal to take BCE private by a consortium led by the Ontario Teachers’ Pension Plan may not close before the end of the quarter after the Quebec Court of Appeal ruled on Wednesday that the agreement was not fair to bondholders. The news sent BCE shares down as much as 14% on Thursday.
The telecom company and the purchaser will seek leave to appeal to the Supreme Court of Canada the Quebec Court of Appeal’s decision to deny the company’s plan of arrangement related to the BCE’s proposed privatization.
“The judgment overturning the Quebec Superior Court decision rewrites Canadian law relating to the duty of Canadian boards of directors to maximize value for shareholders in the context of a change of control transaction, as well as to the entitlements of bondholders in those circumstances,” says Martine Turcotte, chief legal officer of BCE and Bell Canada. “Both the transaction and the issues of law involved are of public importance in Canada.”
Teachers’ adds that it remains “committed to this transaction.”
In light of the decision, BCE says the expected timing for the closing of the transaction will be contingent on the Supreme Court granting leave to appeal and the timing related to any such appeal.
The committee comprising certain institutional holders of Bell Canada debentures was “delighted” with the decision, according to Markus Koehnen and Max Mendelsohn, partners with McMillan Binch Mendelsohn and counsel to the 97 bondholders.
“They are gratified that the Court of Appeal recognized the unfairness that the proposed plan of arrangement would have imposed on the unitholders, pension fund beneficiaries, insurers and others on behalf of whom our clients were contesting the plan of arrangement,” the lawyers say.
The committee was one of two bondholder groups that contested the BCE privatization. It is comprised of money managers and insurance firms such as Addenda Capital, CIBC Global Asset Management, Manulife Financial, Phillips, Hager & North, Sun Life, and TD Asset Management.
In June 2007, BCE entered into a definitive agreement to be acquired by an investor group led by Teachers’ Private Capital, the private investment arm of the Ontario Teachers’ Pension Plan, Providence Equity Partners, Madison Dearborn Partners, and Merrill Lynch Global Private Equity.
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