Ontario Teachers Pension Plan to bid for BCE

The OTPP is due for a big dollop of irony once the bidding war it started for Bell Canada Inc. ends in the coming weeks.

Teacher’s, Bell Canada’s largest shareholder with about 6% of all outstanding shares, confirmed it’s going to make a play for the company late Monday afternoon.

OTPP of course helped put the lumbering communications service provider in play a couple of months ago when it changed its investment status from passive to active (much to the chagrin of Bell Canada executive Michael Sabia)

But does anyone see the Teacher’s-led consortium as eventual owner of Bell Canada? Not I.

Telus, despite the obvious regulatory hurdles it has to jump over, I believe has more financial flexibility with its bid to own Bell Canada.

Telus, Western Canada’s largest communications company ,also has more incentive to own Bell.

It’s a telecoms service provider for one which means there are more synergies between Bell and Telus assuming it takes over the already depleted Bell Canada ranks sometime this summer.

Telus as a telecoms service provider has a longer-term view of the market and will bid the company up knowing full well it has years to pay off the acquisition.

In contrast, the private equity and pension fund strategy is to buy Bell with loads of debt and hopefully flip the beast in two to-four years time. In other words, the financial firms need the deal to pay for itself and quickly.

Telus is probably a better overall parent for Bell anyways. Burnaby, B.C.-based Telus can wring up to $1-billion, according to equity analyst estimates, out of Bell Canada’s operations. I happen to think they can do better.

Chief executive Darren Entwistle and his management team have run and integrated telecom behemoths before. The pension funds and private equity firms haven’t.

Remember Mr. Entwistle turned old inflexible former Crown Corporations, like BC Tel and Alberta Tel, into the high-flying company Telus is today. He came on board just before Telus announced its $6.6-billion acquisition of Clearnet in 2000 and was smart enough to let George Cope and his team do their thing (not without disagreements) for years afterwards.

So Teacher’s, which pushed Bell into the current auction process, will have to be content with the short-term stock surge it helped create because it’s sure as heck not going to own Bell Canada when all is said and done.

That’s got to give Mr. Sabia some satisfaction even if he’s forced to pull the golden parachute at the end of the auction.