TORONTO and WINNIPEG – Citing unspecified issues of national security, the federal government has squashed the proposed sale of Manitoba Telecom Services’ Allstream business unit to Accelero Capital Holdings.
"The Government of Canada has concluded its review of Accelero Capital Holdings' proposed acquisition of the Allstream division of Manitoba Telecom Services Inc. (MTS) under the national security provisions of the Investment Canada Act. The result of this review is that the transaction will not proceed”, reads the short statement issued late Monday by Industry Minister James Moore.
Moore added that Allstream, which is the business-services division of MTS, “operates a national fibre optic network that provides critical telecommunications services to businesses and governments, including the Government of Canada.”
The proposed $520 million deal, announced last May, followed an eight month strategic review by MTS to explore different options for Allstream’s future. Headquartered in Toronto, Allstream has approximately 30,000 km of fibre network across Canada and a client base of more than 50,000 businesses.
MTS Allstream issued its own statement saying that it is “extremely surprised and disappointed” by the government's decision
“MTS Allstream and Accelero have responded openly and constructively to Industry Canada's requests for information in the 136 days since the transaction was announced, and Accelero has proposed far-reaching, comprehensive and binding undertakings to the Canadian government, including a commitment to invest $300 million over three years to pursue Allstream's capital plans”, the statement reads.
“The government has nevertheless now made the determination to reject the transaction due to unspecified national security concerns, and has rejected an offer from MTS and Accelero to take whatever actions are necessary to address the government's concerns.”
MTS Allstream added that its decision to proceed with the sale was “heavily influenced” by “the Federal government's past active support of Accelero's principals” – Accelero is owned by former Wind Mobile backer and Egyptian businessman Naguib Sawiris – and noted that the deal is “entirely consistent with recent changes in Federal policy aimed at increasing foreign direct investment in Canada's telecom sector.”
"We pursued this transaction, with Accelero as our partner, in direct response to the Federal Government's stated policy objectives of increasing foreign investment and driving greater competition in Canada's telecommunications sector, so this result is very difficult to understand or accept," said MTS Allstream CEO Pierre Blouin, in the statement.
MTS Allstream added that both it and Accelero, with advice from their respective legal and financial advisors, are reviewing their options.
More to come…
