After delays that had investors wondering whether the deal would happen at all, BCE Inc. has announced a final agreement has been reached and will be moving forward at the original sale price.
The purchase group is led by the massive Ontario Teachers' Pension Plan.
The agreement comes after delays and speculation that the banks backing the deal would demand a better price on the $52 billion takeover, or possibly even back out.
The deal for telecom giant BCE -- Bell Canada's parent company -- was first announced over a year ago.
Since then, the takeover has cleared regulators and won a legal challenge from bondholders that took them to the Supreme Court.
"Originally it was supposed to be by now, by the end of June. They then delayed it until, at the latest, the end of September," said BNN's Michael Kane.
"This is the first time we've heard any mention beyond the end of September and they're saying on or before Dec. 11, they'll complete this transaction at the offer price of $42.75."
The deal for the parent company of Bell Canada is the largest-ever transaction of its kind.
Company chairman Richard Currie said in a release that preserving the share price of the acquisition is, in the opinion of the board, "very much in the best interest of shareholders, the company and Bell Canada, particularly given current capital market conditions."
The acquisition partners include:
- Teachers Private Capital (The private investment arm of the Ontario Teachers' Pension Plan)
- U.S. firm Providence Equity Partners
- U.S. firm Madison Dearborn Partners
- U.S. firm Merrill Lynch Global Private Equity
Under the terms of the final agreement BCE common-share dividend payments will end until the deal closes. And the fee to be paid by the purchasers if they back out, increases to $1.2 billion.
In a related announcement, BCE confirmed that CEO Michael Sabia will be replaced by George Cope effective next week.
Cope, a former Telus Corp. executive, has been Bell Canada's president and CEO since October.
"The signing of the financing and credit agreements and the resolution of issues involved in funding this transaction are the essential milestones to closing with both the purchaser and the lenders," Sabia stated.
"The company's focus now has to shift to Bell Canada's operations, and the preparations for its privatization, making it an opportune time to turn to George Cope."
A statement from the takeover group led by the Ontario Teachers' Pension Plan said the group is satisfied with the deal.
"We are very pleased to have reached agreement with BCE and that our banks continue to support the transaction. We look forward to completing the transaction on or before December 11, and working with George Cope and BCE's talented management and employees to build on, and add value to, the strong platform that is in place," the statement said.
The last hurdle to the takeover was getting a final deal on financing terms from the banks.
The going-private acquisition will close "on or before Dec. 11," the statement said.
The following institutions have committed to providing billions in financing to complete the deal:
- Citigroup
- Deutsche Bank
- Royal Bank of Scotland
- Toronto-Dominion Bank
Speculation that bankers were trying to get a lower price tag, as well as more attractive loan covenants and interest rates had been keeping BCE shares below the offer price.
On Thursday, the stock closed at $35.15.
On Friday, shares in Canada's largest telecommunications company rose 13 per cent, or $4.58, to $39.73 on the Toronto Stock Exchange, nearing the sale price.
BCE representatives declined comment about the transaction on Friday, and would not confirm whether the company had agreed to other concessions that weren't in the original announcement.
