BCE sale falls through

After a protracted 18-month sale process, the Ontario Teachers’-led consortium has finally pulled the plug on what would have been the largest buyout ever. The shareholders of BCE are now looking to secure a C$1.2bn break-up fee.

The group of private equity firms due to acquire Canadian telecoms company BCE for C$52 million this morning cancelled the sale process after KPMG confirmed that the company would emerge insolvent from the buyout.

“Receipt of a solvency opinion from a nationally recognized valuation firm,” was one of the conditions of the original sale agreement, according to a statement from the acquirers this morning.

The bell tolls for history's largest buyout

The sale process was cancelled in accordance with the terms of the agreement, said the group, “under these circumstances neither party owes a termination fee to the other.”

BCE, however, suggested in a separate statement today that the purchasers withdrew from the process prematurely, and are liable to pay a break-up fee of C$1.2 billion.

BCE was set to be taken over by a consortium led by the Ontario Teachers’ Pension Plan and including Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity, in a deal struck 18 months ago.

The completion of the buyout, which would have been the largest leveraged buyout to date, had looked increasingly unlikely in recent weeks, following KPMG’s initial statement in November that a solvency opinion was undeliverable.

The Supreme Court of Canada overturned the appeals court ruling in June, clearing the way for the transaction to move forward. The transaction also hit a wall when the lending syndicate sought to renegotiate the terms of the financing because of the slumping markets. After months of negotiations, the parties reached an agreement and the deal was again free to proceed.