Financial Consortium Saves Bell Canada Buyout

Jubilant investors and financial institutions with a stake in the buyout of Bell Canada (BCE) pushed the company's stock up more than 11% Monday in the wake of an agreement by banks to provide the financing for the buyout, which had been stalemated for several weeks.

At $51 billion, it is billed as the biggest buyout ever. The sale, to a group led by the Ontario Teachers' Pension Plan, will be financed by Citigroup, Deutsche Bank, the Royal Bank of Scotland, and Toronto-Dominion Bank.

"The final agreement, with definitive financing now in place, preserves the 42.75 Canadian dollars per common share price announced last June, which the board believes is very much in the best interest of shareholders, the company, and Bell Canada, particularly given current capital market conditions," said BCE chairman Richard Currie in a statement.

The $42.75 (Canadian) price is the same figure the parties agreed to several months ago, but the revised deal calls for postponing the closing date to Dec. 11 and dropping dividend payments to stockholders. The concessions ended up reducing the total price by about $2 a share, but were enough to save a deal that had been in jeopardy when banks balked after capital market structures began slipping. In addition, slightly higher interest rates were awarded to the banks.

Also hailing the latest development was the Ontario Teachers' Pension Plan, which has partnered with Providence Equity Partners, Madison Dearborn Partners, and Merrill Lynch Global Private Equity.

In addition to overcoming the hesitation of the banks to provide financing, the deal was briefly sidetracked when the Quebec Court of Appeal issued a ruling that favored BCE bondholders over stockholders. The Supreme Court of Canada, however, overturned the Quebec court ruling, paving the way for the buyout to continue.