Cerberus joins BCE battle

Cerberus has joined the race to buy BCE, a $29 billion Canadian telecoms giant currently undergoing a strategic review, as the country’s biggest pension funds scramble for some involvement in the deal.

US alternative asset manager Cerberus has teamed up with a group of Canadian investors to explore a bid for BCE, a Canadian telecoms group, raising the prospect of a bidding war with a rival group that includes Kohlberg Kravis Roberts.

BCE said in a statement yesterday that it had entered into discussions about a possible take-private deal with the Cerberus-led group, which has signed “non-disclosure and standstill agreements with BCE on a non-exclusive basis.”

BCE did not name the other members of the group, but the Canada-based paper Globe and Mail said they included two Canadian pension funds, the Hospitals of Ontario Pension Plan and OPTrust, and also Canadian media giant CanWest.

At its closing share price yesterday of $36.36, any buyout of BCE would cost about $29 billion (€21.6 billion), making it the second largest private equity deal to date behind KKR and TPG’s ongoing acquisition of US utility TXU.

BCE has spent the last month in negotiations with a rival group, which is led by the Canada Pension Plan Investment Board and also includes KKR, the Caisse de depot et placement du Quebec and the Public Sector Pension Investment Board.

The Ontario Teachers’ Pension Plan has also said it may bid for the company, and has reportedly enlisted the support of US buyout firm Providence Equity Partners. The Ontario Municipal Employees Retirement System, yet another Canadian pension fund, said last month it may also join this group.

BCE is currently conducting a strategic review, which is scheduled to be completed in the third quarter of 2007. Its share price has risen by almost a third since reports first emerged about the possible buyout deal.

Cerberus recently won a $7 billion bidding war for Chrysler, the ailing US arm of car-maker DaimlerChrysler.