BCE has announced:
that 9,918,414 of its 20,000,000 Cumulative Redeemable First Preferred Shares, Series AA (“Series AA Preferred Shares”) have been tendered for conversion, on a one-for-one basis, into Cumulative Redeemable First Preferred Shares, Series AB (“Series AB Preferred Shares”). Consequently, BCE will issue 9,918,414 new Series AB Preferred Shares on September 1, 2007. The balance of the Series AA Preferred Shares that will not have been converted will remain outstanding and will continue to be listed on The Toronto Stock Exchange under the symbol BCE.PR.A.
The Series AA Preferred Shares will pay on a quarterly basis, for the five-year period beginning on September 1, 2007, as and when declared by the Board of Directors of BCE, a fixed dividend based on an annual dividend rate of 4.800%.
The Series AB Preferred Shares will pay a monthly floating adjustable cash dividend for the five-year period beginning on September 1, 2007, as and when declared by the Board of Directors of BCE. The Series AB Preferred Shares will be listed on The Toronto Stock Exchange under the symbol BCE.PR.B and should start trading on a when-issued basis at the opening of the market on August 28, 2007.
Under and subject to the terms of the definitive agreement, as amended, the investor group has agreed to acquire all of the outstanding Series AA Preferred Shares at a price of $25.76 per share and all of the outstanding Series AB Preferred Shares at a price of $25.50 per share, together, in each case, with accrued but unpaid dividends to the Effective Date (as such term is defined in the definitive agreement).
I previously recommended conversion into the AB shares … the difference in take-over price is minimal after accounting for interim dividends and the difference in expected dividends should the deal not go through is enormous.
The results of this conversion are excellent for traders, should the BCE prefs survive … two very large issues that convert into each other every five years should provide ample opportunity for arbitrage.