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Buyers dump $28b BCE buy-out

12 Dec 2008
00:00
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The C$34.8 billion ($28.2 billion) buy-out of Canada's biggest telecom company BCE has collapsed after the buyers insisted conditions had not been met. The deal had been billed as one of the biggest buy-outs ever.

The collapse wasn't a surprise. In November independent accountants KPMG said the company would have far too high a level of debt to be viable after the buy-out.

Against fierce opposition from employees and other stakeholders, BCE agreed to the buy out by the Ontario Teachers' Pension Plan, along with US-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity nearly 18 months ago.

One of the deal's key conditions was receipt of a solvency opinion from a nationally recognised valuation firm, which in the event KPMG did not issue.

Because of this shortcoming, the investor consortium has stated it does not owe the pre-arranged $1.2 billion break-up fee. But BCE has announced it intends to pursue this fee, arguing the deal was terminated prematurely.

Analysts have speculated that the matter could end up in court.

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