Onex joins KKR team in BCE battle

Canadian private equity firm Onex has joined KKR and Canadian pension giants Caisse de dépôt and CPP Investment Board in the group’s quest to acquire Canada’s largest telecom company.

Onex Corporation has joined one of three investor groups in take-private talks with BCE, Canada’s $30 billion (€22 billion) telecom giant.

The Canadian private equity firm has teamed up with Kohlberg Kravis Roberts and two of Canada’s largest pension funds: Caisse de dépôt et placement du Québec and Canada Pension Plan Investment Board.

“The addition of Onex strengthens our Canadian-led consortium as it remains focused on the due diligence process for the potential acquisition of an important Canadian organisation,” David Denison, CCP Investment Board president and CEO, said in a statement. He added that the investor group would “still welcome the opportunity to add additional Canadian pension funds to our consortium” if permitted by BCE’s strategic oversight committee.

The investor group is likely banking on participation of domestic pensions – and now a domestic private equity firm – offsetting anxiety in Canada that a national asset will become foreign-owned or have its assets stripped and sold by its buyers.

“Each of the consortium partners is committed to generating strong investment returns with a long-term investment horizon,” Denison said. “Further, the CPP Investment Board and the Caisse de dépôt et placement du Québec have very long-term investment mandates to support the pension promise of millions of Canadians.”

Two other Canadian pension- and US private equity-backed consortiums are in talks with BCE.

The private investment arm of the Ontario Teachers’ Pension Plan, Teachers’ Private Capital, has partnered with Providence Equity Partners, while the Hospitals of Ontario Pension Plan has partnered with Cerberus Capital Management.

BCE’s “strategic review” process is expected to close in the third quarter.

Should a deal with any of the three groups come to fruition, it would be the largest-ever Canadian buyout. It would also surpass TPG’s and Goldman Sachsrecent $27.5 billion buyout of US regional wireless carrier Alltel to become the largest-ever private equity deal in the telecom sector.