Bell Canada (BCE) agreed on Saturday to be bought by a private partnership led by the Ontario Teachers Pension Plan in a deal valued at C$51.7 billion (US$48.5 billion) that would be the largest leveraged buyout ever.
The deal to take Canada's largest telecommunications company private, if approved by shareholders, would also be the largest takeover in Canadian history.
The Ontario Teachers Pension Plan Board, the US-based Providence Equity Partners and Madison Dearborn Partners, LLC would buy BCE Inc for C$51.7 billion, which includes the assumption of C$16.9 billion worth of debt, preferred equity and minority interests, BCE said.
The Toronto-based pension plan -- with assets of C$106 billion last year -- invests and administers the retirement funds for Ontario's 167,000 teachers and 104,000 retired teachers.
The pension plan was BCE's largest shareholder with a 6.3 percent stake.
Michael Hlinka, an independent financial analyst, called the deal unique because it involves a leveraged buyout by a private partnership of a huge public company.
"The system worked in that Bell shareholders were not happy with the current management and ... the way the company was run,'' and were able to receive a substantial premium over the share price, Hlinka said.
Jim Leech, senior vice president of Teachers' Private Capital, the investment wing of the pension plan, said this deal is larger than the February purchase of energy provider TXU Corp by a consortium of buyout shops for a record $45 billion.
"This is bigger than that, but that's not why we bought it," Leech said in an interview. "It's a bit daunting."
Leech said the plan has been a major BCE shareholder since the early 1990s.
The investor group will acquire all the common shares of BCE not already owned by Teachers for an offer price of C$42.75 per common share. The stock traded at C$31.33 at the start of the year and has been as low as C$25.32 in the last year. It closed at C$40.34 on Friday.
BCE chief executive Michael Sabia said the offer was a 40 percent premium over the average price for BCE shares over the past year.
"This is a huge amount of value delivered to our shareholders," he said on the same conference call.
Hlinka said that for the amount being offered by Teachers, the new owners will have to improve BCE's earnings to make the deal beneficial.
BCE chairman Richard Currie said the deal provides great value for shareholders.
The group led by the pension plan beat out several other bidders including New York-based Cerberus Capital Management LP with Pacific Century Group, and the Canada Pension Plan Investment Board with backing from Kohlberg Kravis Roberts and Co.
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