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BCE rebounds from NY drop, but questions linger
Tuesday, May 20, 2008
TORONTO (Reuters) - Shares of BCE Inc
The stock of Canada's top telecommunications firm was up 81 cents, or 2.2 percent, at $37.43 on the New York Stock Exchange.
It had slumped 5.6 percent in New York on Monday, in the wake of weekend reports that the banks behind the buyout of BCE had submitted new financing terms to the buyout group, which includes the Ontario Teachers Pension Plan.
The terms contained higher interest rates and other "onerous" conditions, a source told Reuters.
The reports added to uncertainty over whether the deal will be successful, and came as lenders struggle with financing commitments amid tight credit markets.
Troy Crandall, an analyst at MacDougall, MacDougall & MacTier, said he thinks there's a 40-50 percent possibility that the deal will be repriced, perhaps to between C$40 and C$41 a share, from the current C$42.75 per share offer. Even then, he said, BCE shareholders would be best off taking a reduced offer.
"I would see it as being in (BCE's) best interest to take the deal, rather than have the deal fall apart completely or spend months or possibly years in court."
If the deal collapses altogether, BCE shares could plunge
to between C$30 and C$32, Crandall estimated. He added that
that price takes into account the possibility of a takeover bid
from Telus Corp
Telus was in talks to acquire BCE before the Teachers' group emerged as the winner. Telus walked away citing "inadequacies" in the bidding process.
Those inadequacies are widely believed to center on Telus being granted only limited access to certain BCE data during the due diligence process.
"You've got to keep in mind that there would be a lot of risk in a possible Telus takeover too, because there's so many problems from a competitive standpoint," Crandall said.
A Telus takeover of BCE would mean a reduction in the number of large wireless providers in Canada from three to two -- a result that would be at odds with the federal government's stated aim of increasing competition in the wireless market.
The worst-case scenario for BCE would involve the Teachers' offer collapsing and Telus announcing it isn't interested in bidding for BCE.
The shares of Montreal-based BCE could fall into the high-C$20 range if this unfolded, Crandall said.
On the Toronto Stock Exchange, which was closed for the Victoria Day public holiday on Monday, BCE shares were down C$1.69, or 4.4 percent, at C$37.13.
(Reporting by Wojtek Dabrowski and Jonathan Spicer; Editing by Rob Wilson)
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