MONTREAL – BCE Inc., Canada’s largest telecommunications company, with 127 years of history, has confirmed it is in talks with a group of investors to take the whole enterprise private.
In a statement today, the company said it is having discussions with a group of leading Canadian pension funds.
The group is led by the Canada Pension Plan Investment Board (CPPIB), the Caisse de dépôt et placement du Québec, and Canada’s Public Sector Pension Investment Board (PSP Investments), who have signed a non-disclosure and standstill agreement with BCE on a non-exclusive basis.
Kohlberg Kravis Roberts and Co. (KKR), a leading global private equity firm, has also signed the agreement and will join the Canadian-led consortium as a minority partner.
The consortium confirmed, in its own press release, that discussions with BCE are under way.
“We are pleased to be working with BCE and its Board towards a potential transaction that would enable long-term value creation for the company. We look forward to working with BCE and our consortium partners as we proceed with the due diligence process,” said David Denison, CPP Investment Board President and CEO.
BCE said it “will be guided by the ongoing need to maximize value for the company’s shareholders, taking into consideration the need to meet all legislative and regulatory requirements, including ensuring the Company remains Canadian, to meet existing foreign ownership restrictions.”
BCE also said the Board will continue to explore “other opportunities”, adding “no assurances can be provided that this continuing review of alternatives will result in any specific action being taken by the Company”.
BCE’s statement comes after weeks of speculation that the $106 billion Teachers Fund, which owns 5.3% of BCE’s shares, was amassing funds to take BCE private. There was no mention of Teachers in today’s statement.
Until today, BCE has maintained it was not pursuing discussions concerning a buyout.
Henri-Paul Rousseau, President and CEO of the Caisse, said “the Caisse is joining the consortium with the objective of submitting a proposal that will be acceptable to all stakeholders. Obviously, the size of the Caisse’s investment in a potential transaction involving BCE will take into account its investment in Quebecor Media.”
Gordon Fyfe, President and CEO, PSP Investments, said: “Each of the partners will actively bring in-depth knowledge and expertise to the consortium.”
Henry Kravis, co-founding member of KKR, said his company’s “experience in large, complex transactions of comparable size will be of significant value to this process.”
The consortium noted that discussions are at an early stage and there can be no assurance that a transaction of any kind will result.
Debt ratings service Moody’s however, expresses reservations about the announcement, and has placed BCE under review “for a possible downgrade,” since it figures the whole thing will certainly go ahead.
“The review will focus on the likelihood that a purchase offer will be made to and accepted by BCE’s shareholders and approved by regulatory authorities. Moody’s will also consider the degree of increased leverage that would likely result if an acquisition were to occur. While there is neither an offer nor a specific financing structure to evaluate at this time, Moody’s is concerned that if a buyout were to occur, it might result in a considerable increase in leverage. If so, it is possible that the ratings of both companies would be lowered by more than one notch, and might in fact be lowered below the investment grade level and the Prime short-term rating level,” reads the Moody’s release.
Glenn Wanamaker is Cartt.ca’s Quebec Editor.
