Telus salivating over Bell Canada?

Bell Canada logo With the Ontario Teachers Pension Plan deal for Bell Canada in jeopardy, Telus executives must be warming up old spreadsheets in anticipation of another takeover bid for the beleaguered telecom services provider.

The credit crunch has financiers pressing the Teachers-led consortium to rework the terms of the $42.75 a share deal for Bell. Compounding the problems for Teachers, its partners and Bell is a Quebec court that surprisingly ruled in favour of upset bondholders yesterday, saying the deal shouldn’t be approved without their consent. Bell could still buy out or settle with the bondholders, which would completely negate my theory of course. Shareholders aren’t as sure - Bell shares are off 13% as of 10AM on Thursday May 22.

That leaves Telus as the most likely suitor for Bell assuming the $52-billion leveraged buyout collapses, an event that now seems likely. Why would Bell agree to a Telus takeover given the fact the parties couldn’t come to an agreement last year?

Simply put, Bell’s strategic options are limited assuming Teachers and its partners back out - it has to play ball with Telus if and when the current arranges collapses.

Bell can’t go back to market as an independent entity; by putting itself up for sale last year the company admitted as much.

A takeover by another private equity firm, in theory, is still an option for Bell though the financing terms for Teachers or another consortium will be more onerous given the current credit climate. That’s assuming Blackstone or some other private equity firm can muster up the strength to mount a takeover of massive proportions.

Then there’s the onerous Canadian ownership restrictions that necessarily limits the pool of possible suitors to take over the beleaguered company. This makes Telus one of the few companies that’s both interested and in a decent position to buy Bell even if the companies are mortal enemies.

Bell executives must sell the company or face a barrage of lawsuits. Step right up Darren Entwistle; whither Jim Leech. George Cope and co. await your call.

May 22, 2008 | Filed Under News Items and Commentary 

Comments

2 Responses to “Telus salivating over Bell Canada?”

  1. jules on May 29th, 2008 2:05 am

    Good commentary kevin!
    I wonder if the imminent threat of a crashing canadian telecom icon will force the hand of the CRTC to speed up their foreign ownership discussions?

    cheers,
    jules

  2. Kevin Restivo on May 29th, 2008 12:32 pm

    Jules,

    Thanks for the comment.

    It is the Harper government and Industry Canada that would implement such sweeping changes.

    Alas, the Conservatives have a minority government which means there is little to no chance over the short term that foreign ownership restrictions will be changed.

    If the Conservatives, however, were able to secure a majority I believe foreign ownership restrictions on all businesses in all industries will be removed.

    Kevin

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