Canadian court approves $52bn BCE buyout

A judge has dismissed a bondholders’ lawsuit critical to the success of the record-breaking BCE buyout by Ontario Teachers’, Madison Dearborn, Providence and Merrill Lynch.

Canada’s largest-ever agreed leveraged buyout was approved by the Quebec Superior Court late Friday.

The court also dismissed bondholder lawsuits that threatened to impede the $52 billion (€33.8 billion) buyout of telecom giant BCE by Teachers’ Private Capital, Providence Equity Partners, Madison Dearborn Capital Partners and Merrill Lynch Global Private Equity.

Teachers’ had previously indicated it might abandon the deal if the court ruled in favour of the bondholder group, as it would mean the investor consortium would be forced to buy out debentureholders. The plaintiffs were upset by the devaluation of BCE bonds, which they attributed to the pending LBO, and felt the take-private should be structured as a reorganisation, thus giving them voting rights.

“We are very pleased with the Superior Court's decisions. On every point of contention, the court ruled in favour of BCE,” Martine Turcotte, chief legal officer of BCE and Bell Canada, said in a statement. “The court's decisions affirm our long-standing position that the claims of these debenture holders are without merit and that BCE acted in accordance with its rights and obligations with respect to the debenture holders.”

He added that BCE now looks forward to closing its deal with the investor consortium, and expects to do so in the first part of the second quarter of 2008, assuming bondholders fail to appeal the court’s ruling.

Erol Uzumeri

The transaction still requires regulatory approval from the Canadian Radio-television and Telecommunications Commission and Industry Canada.

Teachers’ Private Capital, the $16 billion private equity arm of the Ontario Teachers’ Pension Plan, was recently voted Canadian Private Equity Firm of the Year in the Private Equity International Awards 2007.

An in-depth discussion with TPC’s head, Erol Uzumeri, will be featured in the April edition of Private Equity International.