BCE Inc.’s announcement that it planned to take its regional affiliate Bell Aliant private was hardly a surprise, but getting the $4-billion deal to actually come together was all about making the right offer.
Telecom giant BCE, which owned 44% of the publicly traded Atlantic Canada telephone and Internet provider, had proposed buying out the remainder of the company in 2012. That deal didn’t come together, so BCE tried again last year. The result was an agreement that has worked out well for everyone since the deal closed last fall.
“Everyone was of the view that the combination made a lot of sense,” said Glenn Sauntry, vice chairman of BMO Capital Markets and adviser to BCE on the deal. “But the devil is in the details – i.e., the price.”
Acquiring Bell Aliant had a number of advantages for BCE. In addition to the opportunity to save money by removing some duplicate costs and gaining Bell Aliant’s wireline telephone and Internet customers, BCE benefited from investments Bell Aliant had made in fiber-to-the-home broadband and added about one million homes ready for the company’s IPTV service.
Bell Aliant’s stock had historically done well. However, its business was focused on wired telephone and Internet service, a relatively mature market compared to wireless.
“The Bell Aliant shares paid a very attractive yield,” said Peter Buzzi, RBC Capital Market’s managing director and co-head of mergers and acquisitions who worked with BCE on the transaction. “But there wasn’t much opportunity for growth, for capital appreciation.”
The challenge for BCE was to make Bell Aliant an offer that was attractive, but also reflected the stable yet mature growth outlook for the wireline business. After a thorough series of talks, BCE announced in July that it intended to acquire Bell Aliant’s remaining public shares for $31 per share, in the form of 25% cash and 75% BCE common shares.
That added up to a 12% premium over Bell Aliant’s valuation at the time – lower than the typical takeover premium for a public company. “That would be probably what we were most concerned about,” Mr. Buzzi said.
He needn’t have worried — Bell Aliant’s advisers looked the offer over and determined it was a good deal. John Tuer, managing director and head of mergers and acquisitions with Bell Aliant adviser Scotiabank Global Banking and Markets, said he and his colleagues at Scotia recommended the company accept it.
“We did our internal work, based on the forecast of Bell Aliant, and felt it was a fair price,” he said. “We all agreed it was the maximum price we were going to achieve.”
Like in any negotiation, there were times when it was stressful and could have fallen apart, Mr. Tuer said. But he also said each side had something to offer the other, making the talks evenly weighted.
“Both sides felt that if they couldn’t make the math work, the status quo wasn’t the end of the world,” Mr. Tuer said. “It was in BCE’s interest to put a price on the table that the independent committee thought was fair and they could recommend.”
Bell Aliant’s board and its special committee studying the deal unanimously recommended the offer. The company’s former shareholders have done very well, with BCE’s shares posting about an 18% return since the deal closed.
“Both sides, I’m sure, felt like they gave up something, but ended up in a good spot in terms of fairness of the deal for both parties,” said Stephen MacCulloch, vice chairman of global investment banking with Scotiabank. “I think it was a good outcome for everyone.”
Financial Post
cbrownell@nationalpost.com
Twitter.com/clabrow
No comments:
Post a Comment