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Largest leveraged buyout in history dead
Takeover of Canada's largest telecom company, BCE, officially dead; break-up fee in dispute
But a review by accounting firm KPMG found that BCE would not meet required solvency tests of the privatization agreement, partly due to the amount of debt involved in the transaction and current market conditions.
The buyers announced the decision early Thursday.
"Because KPMG has concluded that a required test for the solvency opinion was not met, this mutual condition to completion of the acquisition could not be, and was not, satisfied," said Thursday's statement. "Accordingly, the purchaser terminated the agreement in accordance with its terms."
Shareholders overwhelmingly approved the buyout group's offer of $42.75 Canadian dollars per share in September of 2007. The stock closed at $23.02 Canadian on Wednesday.
BCE management had agreed to the deal in June 2007, just before credit markets began to unravel in North America.
The buyers group said in the statement that no break-up fee will be paid, but BCE said in a statement it will demand payment of the $1.2 billion Canadian ($970 million) break-up fee.
BCE said the purchasers' notice was invalid because it was delivered before the Thursday-midnight termination deadline, but "given the purchaser's position, the BCE privatization transaction will not proceed."
Canada's largest telecommunications company said it had satisfied all closing conditions other than the solvency opinion. A company spokesman said they would have no immediate further comment.
The banks that agreed to finance the deal will now be off the hook for billions of loans. Citigroup was directly on the hook for at least $11 billion of the $35 billion in loans backing the deal. The Royal Bank of Scotland, Toronto-Dominion Bank and Deutsche Bank were to provide the rest. It could have meant billions of losses for the banks.
Some analysts speculated the banks would try to get out of the deal.
The Toronto-based Ontario Teachers' Pension Plan -- with assets of $108 billion Canadian ($87 billion) in 2007 -- invests and administers the retirement funds for Ontario's 353,000 active, inactive, and retired teachers. U.S.-based Providence Equity Partners and Madison Dearborn Partners LLC are also involved in the proposed buyout.
BCE, which has more than 54,000 employees, had annual revenue of $17.8 billion Canadian ($14.4 billion) in 2007. It had 5.8 million wireless subscribers, 8.64 million phone lines, 1.94 million Internet subscribers and 1.82 million satellite television subscribers in 2006. It is Canada's largest communications company.
New Chief Executive George Cope took over on July 11 despite the deal not closing yet. Cope has refocused the Montreal telecom operator as it faces more intense competition in its wireless and Internet data businesses.
BCE said in its statement it will look to reinstate its common stock dividend beginning with its fourth-quarter dividend payable on Jan. 15.
The deal has been in some doubt for a year for a variety of reasons, including the credit crisis and because a court ruling temporally put it in jeopardy. Earlier this year, Canada's Supreme Court overturned a lower court ruling that said the sale of BCE didn't adequately consider bondholders' interests.
Canadian regulators also ordered some of aspects of the deal to change. BCE, the buyers and the banks also re-negotiated the deal in July so that the dividend would be eliminated and the closing would be put off until December.
Article link:
http://finance.yahoo.com/news/Larges...-13805951.html
Largest leveraged buyout in history dead
Takeover of Canada's largest telecom company, BCE, officially dead; break-up fee in dispute
- Thursday December 11, 2008, 9:39 am EST
But a review by accounting firm KPMG found that BCE would not meet required solvency tests of the privatization agreement, partly due to the amount of debt involved in the transaction and current market conditions.
The buyers announced the decision early Thursday.
"Because KPMG has concluded that a required test for the solvency opinion was not met, this mutual condition to completion of the acquisition could not be, and was not, satisfied," said Thursday's statement. "Accordingly, the purchaser terminated the agreement in accordance with its terms."
Shareholders overwhelmingly approved the buyout group's offer of $42.75 Canadian dollars per share in September of 2007. The stock closed at $23.02 Canadian on Wednesday.
BCE management had agreed to the deal in June 2007, just before credit markets began to unravel in North America.
The buyers group said in the statement that no break-up fee will be paid, but BCE said in a statement it will demand payment of the $1.2 billion Canadian ($970 million) break-up fee.
BCE said the purchasers' notice was invalid because it was delivered before the Thursday-midnight termination deadline, but "given the purchaser's position, the BCE privatization transaction will not proceed."
Canada's largest telecommunications company said it had satisfied all closing conditions other than the solvency opinion. A company spokesman said they would have no immediate further comment.
The banks that agreed to finance the deal will now be off the hook for billions of loans. Citigroup was directly on the hook for at least $11 billion of the $35 billion in loans backing the deal. The Royal Bank of Scotland, Toronto-Dominion Bank and Deutsche Bank were to provide the rest. It could have meant billions of losses for the banks.
Some analysts speculated the banks would try to get out of the deal.
The Toronto-based Ontario Teachers' Pension Plan -- with assets of $108 billion Canadian ($87 billion) in 2007 -- invests and administers the retirement funds for Ontario's 353,000 active, inactive, and retired teachers. U.S.-based Providence Equity Partners and Madison Dearborn Partners LLC are also involved in the proposed buyout.
BCE, which has more than 54,000 employees, had annual revenue of $17.8 billion Canadian ($14.4 billion) in 2007. It had 5.8 million wireless subscribers, 8.64 million phone lines, 1.94 million Internet subscribers and 1.82 million satellite television subscribers in 2006. It is Canada's largest communications company.
New Chief Executive George Cope took over on July 11 despite the deal not closing yet. Cope has refocused the Montreal telecom operator as it faces more intense competition in its wireless and Internet data businesses.
BCE said in its statement it will look to reinstate its common stock dividend beginning with its fourth-quarter dividend payable on Jan. 15.
The deal has been in some doubt for a year for a variety of reasons, including the credit crisis and because a court ruling temporally put it in jeopardy. Earlier this year, Canada's Supreme Court overturned a lower court ruling that said the sale of BCE didn't adequately consider bondholders' interests.
Canadian regulators also ordered some of aspects of the deal to change. BCE, the buyers and the banks also re-negotiated the deal in July so that the dividend would be eliminated and the closing would be put off until December.
Article link:
http://finance.yahoo.com/news/Larges...-13805951.html