BCE / Teachers' Deal : Chattering Classes Humiliated

The Canadian Press has reported:

The purchase of BCE Inc. (TSX: BCE.TO) by a group led by the Ontario Teachers’ Pension Plan hit a snag Wednesday after the Quebec Court of Appeal overturned a lower court’s decision to allow the largest corporate takeover in Canadian history.

The appeal court sided with the company’s bondholders in reversing Quebec Superior Court Justice Joel Silcoff’s decision to allow the takeover of the company in a deal worth $52 billion.

The bondholders had sought to block the proposed leveraged buyout of Canada’s largest telecom company that they say treats them unfairly because it loads the telecom giant up with debt and makes their bonds a much riskier investment.

“BCE never attempted to justify the fairness and reasonableness of an arrangement that results in a significant adverse economic impact on the debentureholders while at that same time it accords a substantial premium to the shareholders,” the five-judge panel ruled.

Mark Meland, one of the lead lawyers for the bondholders, said his clients were pleased by the court’s decision that was widely expected to side with the company.

“The chattering classes were virtually unanimous in stating incorrectly that we had no chance in being successful, but our group, the bondholders that I represent, we always believed we had a good case,” Meland said.

Mea culpa, mea culpa, mea maxima culpa, and profound apologies to Mr. Meland!

But congratulations … the plot thickens!

The last report on this deal was regarding sabre rattling by the banks.

BCE has the following preferred shares outstanding: BCE.PR.A, BCE.PR.C, BCE.PR.D, BCE.PR.E, BCE.PR.F, BCE.PR.G, BCE.PR.H, BCE.PR.I, BCE.PR.R, BCE.PR.S, BCE.PR.T, BCE.PR.Y & BCE.PR.Z

I have no idea what’s going to happen … there are financing jitters and now some legal jitters … I have no expertise, special information or analytical advantage in either area. It’s all speculation.

Update: More on Bloomberg:

Today’s decision “rewrites Canadian law relating to the duty of Canadian boards of directors to maximize value for shareholders,” Martine Turcotte, BCE’s chief legal officer, said in the company’s statement.

Update: BCE is seeking leave to appeal to the Supreme Court.

Update: The Globe has published the court judgement. Kudos for them! What I’d really like to see is a decision by the relevant authorities that all paperwork filed in all court cases be made publicly available (via Internet) with no charge … but until that happy day, I’ll settle for the press occasionally publishing scraps.

3 Responses to “BCE / Teachers' Deal : Chattering Classes Humiliated”

  1. prefhound says:

    The judgement makes great reading. Basically, the duty of the Board is to consider the best interests of the corporation and all security holders, not just maximizing shareholder value. In this deal, considerable value ($2B at least) was transferred from the bond holders to the shareholders. Neither the bond holders nor BCE wanted the court to try to find a middle ground, so the Court denied the motion to approve the plan of arrangement.

    Therefore, only a complete reversal at the Supreme Court, and not any kind of last minute restructuring of the deal will do. It will cost at least $2.50 per common share to fix the debenture holders in addition to amounts like $3-5 per share to appease the banks.

    Meanwhile, the failure to get approval for the plan of arrangement, if confirmed on appeal, means the break fee is not required.

    80% chance this deal is dead.

  2. […] expected after the court ruling on BCE / Teachers’, BCE stock got slaughtered today, while Credit Default Swaps came in to 315bp from 595bp. Now, […]

  3. […] BCE issues did very poorly on the month, presumably on fears that the Teachers’ deal will not proceed as contemplated. […]

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