Top court will hear BCE appeal
The country’s highest court has agreed to weigh in on the $52 billion privatization of phone giant BCE Inc., a transaction that appeared close to imploding after a lower court effectively ruled the phone company’s bondholders had been treated unfairly.
In a victory yesterday for BCE and its buyers, the Supreme Court of Canada said it has agreed to review last month’s unanimous decision by the Quebec Court of Appeal, a ruling that several observers said could have far-reaching implications for future corporate takeovers in Canada.
BCE, which owns Bell Canada, now has one last chance to complete what is being billed as the biggest leveraged buyout ever.
At issue is whether BCE’s board erred in its duties by failing to consider the interests of BCE bondholders when directors accepted a $42.75 per share takeover offer.
The bid was made by the Ontario Teachers’ Pension Plan and United States private-equity firms Providence Equity Partners Inc., Madison Dearborn Partners LLC and Merrill Lynch Global Private Equity.
The current legal thinking on Bay Street has held that a board’s duty is to maximize shareholder value. The appeal court, however, said that the interests of other stakeholders must also be considered in such a transaction.
The bondholders have complained that a leveraged buyout of BCE would load up the telephone company’s balance sheet with too much debt.
That would probably make the investments of the bondholders less valuable.
Both BCE and lawyers representing the bondholders declined to comment on yesterday’s decision, which was released after the markets closed.
"We’re pleased that the Supreme Court granted leave and will hear the case on June 17," said Deborah Allan, a Teachers’ spokesperson.
The court had already decided to fast track the process if permission to appeal was granted payday loan.
The timing is important.
BCE investors have been speculating for months that the banks backing the deal – and possibly the buyout consortium itself – are eager to find an excuse to walk away from their commitments, and are therefore unlikely to agree to an extension.
The purchasers have until June 30 to conclude the purchase, which can be delayed only with approval from both sides.
The ongoing credit crunch has raised the cost of borrowing money.
That has made the price of completing the transaction significantly higher than when the deal was inked last June.
Shares of BCE closed at $34.65, down 40 cents, on the Toronto Stock Exchange yesterday, before the court’s decision was made public.
BCE had argued in its submissions to the Supreme Court that a failure to hear the case threatened to destroy billions of dollars of value for the company and its shareholders.
Bondholders, on the other hand, had urged the court not to be swayed by the deal’s size when making a decision on whether to grant a leave to appeal.
With files from The Canadian Press