Teachers Agrees to Buy BCE: Plans to Acquire Preferreds!

BCE has announced:

that the company has entered into a definitive agreement for BCE 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 Inc. and Madison Dearborn Partners, LLC. The all-cash transaction is valued at C$51.7 billion (US$48.5 billion), including C$16.9 billion (US$15.9 billion) of debt, preferred equity and minority interests. The BCE Board of Directors unanimously recommends that shareholders vote to accept the offer.

Under the terms of the transaction, the investor group will acquire all of the common shares of BCE not already owned by Teachers for an offer price of C$42.75 per common share and all preferred shares at the prices set forth in the attached schedule.
                            SCHEDULE A

    The cash considerations payable to the holders of the preferred shares
    are as follows:

        First Preferred Shares               Consideration Per Share
              Series R                             $25.65 (*)
              Series S                             $25.50 (*)
              Series T                             $25.77 (*)
              Series Y                             $25.50 (*)
              Series Z                             $25.25 (*)
              Series AA                            $25.76 (*)
              Series AC                            $25.76 (*)
              Series AE                            $25.50 (*)
              Series AF                            $25.41 (*)
              Series AG                            $25.56 (*)
              Series AH                            $25.50 (*)
              Series AI                            $25.87 (*)
    (*)Together with accrued but unpaid dividends to the Effective Date.

I’m astounded. I don’t understand why they would pay so much for the preferreds … but there is a note in the press release that states:

The transaction will be completed through a plan of arrangement, which will require the approval of two-thirds of outstanding common and preferred shares, voting as a class.

I will be fascinated to learn more of the legal intricacies which make this a viable option for the purchasers! As it is, it looks like all my gloomy prognostications will turn out wrong. Although, mind you, the preferred shareholders don’t actually have cash money in their pockets yet – and there have been tears shed over similar offers.


BCE has the following preferred shares outstanding: BCE.PR.A, BCE.PR.C, 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


13 Responses to “Teachers Agrees to Buy BCE: Plans to Acquire Preferreds!”

  1. […] Trading during the month was frantic, as I predicted last month. Shares with a book value in excess of 90% of the total book value at the end of May were sold and replaced with new purchases. This incurred commission expenses of about 0.50% , so those who have been hoodwinked into the belief that the Trading Expense Ratio is an important number will certainly not wish to invest in the fund! I suspect that the BCE/Teachers deal and the proposed redemption of the BCE Preferreds at a very high price relative to current market will lead to continued turmoil in the market and lots more trading in July … but we will see! […]

  2. […] Look for huge gains in the Fixed-Floater and Ratchet indices (note that the indices are presented prior to the June month-end rebalancing) over the next month – these are dominated by BCE issues, which are currently the subject of an extremely rich takeover bid. Sadly, there is probably no way to take advantage of this, since the issues may be confidently expected to be bid well above their June 29 closing quotations at the opening on Monday morning. While there might be a discount to the price Teachers’ is bidding, attempting to take advantage of this spread will constitute “risk-arbitrage” and – in the absence of insider information, I will suggest that the “risk” will highly outweigh the “arbitrage” if a position is taken. […]

  3. […] I find this transaction fascinating, and not just because the plan to acquire the prefs will almost certainly cause MAPF to underperform in July. Why is it being done as a plan of arrangement, which gives the preferred shareholders a right to vote, which I presume is the trigger for the offer? […]

  4. […] Exchange/Reset date is 2011-11-1 (exchanges with BCE.PR.S); until then pays 4.502% of par. Teachers is bidding 25.77 for the ‘T’; 25.50 for the ‘S’. The ‘T’ closed at 23.55-99, 5×10; the ‘S’ closed at 23.85-35, 6×5. […]

  5. […] It’s not entirely clear to me whether this release, dated July 13, refers to the Reminder Notice dated June 28. I think they had other things to worry about at that time! […]

  6. […] KKR cancelled a $1.4-billion European issue and Rosneft is rumoured to be doing the same. This is significant … and if this should happen to be a real, no-fooling turning point, then financing the Teachers / BCE deal could be interesting! […]

  7. […] The KKR/Boots and Chrysler financings both appear to have failed, which probably has Teachers’ feeling pretty nervous about financing the BCE takeover. BCE preferreds seem to be taking all this in stride, however, perhaps due to Desjardins’ calming words. […]

  8. […] I’m very happy with the results. The NAV for the Claymore ETF (CPD on the TSX) is not yet available, but as of July 30, they were up only 5bp-and-a-hair on the month, so it looks like I earned my fees. Note that last month I expressed concern that I would underperform this month, since the BCE/Teachers deal was announced subsequent to month-end and was expected to boost returns of the BCE Prefs considerably. Well, returns of BCE Prefs were outrageous this month, I didn’t hold any, CPD did … but I outperformed anyway. Sometimes it works! (Not all the time, unfortunately!) […]

  9. […] Returning to our more normal and much more interesting apocalyptic screaming, there are musings that the USD 37.2-billion takeover of TXU is at risk, with the suddenly nervous financiers tempted to pay a billion bucks to get out of the deal. Observant readers will not that both amounts are oddly reminiscent of the BCE / Teachers’ agreement, but the musings are rebutted on another news service. Trial balloon? Chatter from clerks? Who knows? There would be a big reputational hit to take. […]

  10. […] Well – how about them fixed-floaters, eh? Or perhaps I should say “BCE Prefs”, since the FixedFloater index was comprised of eight issues in July, seven of which were BCE. It’s amazing what a generous takeover offer can do, eh? Especially since credit concerns had just about reached their peak on June 29 – the FixedFloater index was at 894.4 on June 29; above its low of 878.4 reached on June 11, but not by much! […]

  11. […] I’m still not convinced that Teachers / BCE story is over yet. I have convinced myself, however, that the secret of happiness is putting oneself into a position of not caring. Which is to say, not holding BCE Prefs. […]

  12. […] On June 30, I reported on the takeover and my puzzlement regarding the inclusion of the preferred shares in the offer. The Teachers press release trumpetted: The purchaser has obtained a debt commitment to finance the transaction subject to usual terms for these types of financings. […]

  13. […] takes place when the issues are trading below par. The most famous of these announcement was the abortive Teachers’ bid for BCE, in which the preferreds were planned to be redeemed since the take-over was intended to proceed by […]

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