Canada's top court has ruled in favour of the planned $52-billion leveraged takeover of Bell Canada's parent company, paving the way for the biggest corporate buyout in the country's history to move forward.
The Supreme Court of Canada handed down its ruling at 4:30 p.m. ET on Friday, after the Toronto Stock Exchange's closing bell.
The court did not give reasons for the decision, saying they would be handed down within six months.
The panel of seven justices overturned a unanimous Quebec Court of Appeal decision, therefore allowing BCE and its buyers, Ontario Teachers Pension Plan and its minority U.S. partners, to continue their negotiations to close the deal.
Bondholders put up a fight, trying to block the deal because they felt that BCE had taken on too much debt for the deal to proceed. Their win at the Quebec Court of Appeals delayed the transaction.
The last hurdle before the deal is concluded would likely be the banks, which are slated to provide $34 billion for the $52 billion takeover.
While reasons for the speedy decision weren't given, justices at every stage -- from the appeal, to hearing arguments, to Friday's decision -- put the case on a fast track because of a looming June 30 deadline on the $42.75-a-share deal.
The Supreme Court judges also had the options of upholding the lower court ruling, or agreeing with the court and sending the matter back to the Quebec Superior Court for retrial.
These options would have effectively killed the cash and debt takeover as there wouldn't have been enough time to renegotiate a new deal.
Lawyers for the bondholders had argued that the deal should not go ahead. They contended that the bondholders would be losing out because BCE would be taking on $34 billion in debt in the takeover.
The lawyers had also argued that the firm only had the interests of the shareholders in mind, in negotiating $42.75 a share, while the deal would reduce the value of bondholders' investment by at least $1 billion.
'Precedent setting' decision
Observers have predicted that the top court's decision could have far-reaching consequences, saying the ruling could affect corporate law or clarify the duties of the board of directors during takeovers.
"The ruling seems to reaffirm that the duty of the directors of the company is to the owners of the company -- that is, the shareholders," Gavin Graham, chief investment officer at Guardian Group of Funds, told Â鶹´«Ã½net on Friday following the ruling.
"And as shareholders of the company, we're obviously very pleased. It looks like the takeover, which was agreed to almost a year ago, is going to go through."
Graham added it's a very important ruling for all Canadian corporations, regardless of their size.
"It reaffirms what has been the basis of company law in Western Europe and North American for the last 250 years since share-owning corporations came into being: the duty of the directors of the company is only to the shareholders, because they are the owners of the company," said Graham
"If you have lent money to the company, that's a different thing. If you chose not to take a risk of owning shares in the company, saying 'I want all my money back when the bond matures; I want the fixed rate of interest,' you weren't taking a downside risk -- therefore you aren't entitled to say how the company was run, or how it was disposed of."
In a brief statement on its website, the Ontario Teachers Pension Plan said it was "pleased" with the Supreme Court's decision, and that it's "continuing to work to complete an acquisition of BCE.''
The OTPP is one of Canada's largest pools of investment capital.
