Credit Herald

A Quebec Superior Court judge has approved the proposed leveraged buyout of Canada’s largest telecom company by the Ontario Teachers’ Pension Plan and its partners and rejected a lawsuit by bondholders who had tried to stop the deal.

Justice Joel Silcoff’s ruling cleared the way for BCE’s privatization in what would be the biggest takeover in Canadian history.

A group led by Teachers’ and including U.S. private-equity firms Providence Equity Partners, Madison Partners and Merrill Lynch has offered to buy BCE for $52 billion in cash.

Bondholders had tried to block the deal, saying it treats them unfairly. However, in his written decision, Silcoff said the deal doesn’t change the bondholders’ rights.

"They have the same right to be paid principal and interest by Bell Canada after the plan of arrangement is implemented as they did before," Silcoff wrote.

"The fact that the BCE shareholders will receive a substantial premium on the previous value of their shares and that, at the present time, the economic interests of the contesting debentures may be adversely affected does not in and of itself give them the right to vote as a separate class on the plan of arrangement."

Before Silcoff’s decision was handed down, BCE shares fell 37 cents to close at $35.70 on the Toronto Stock Exchange – 16 per cent below the $42.75 takeout price – as investors continued to worry whether the takeover would be completed in its present form. The takeover still needs approval of the Canadian Radio-television and Telecommunications Commission.

Martine Turcotte, chief legal officer of BCE and Bell Canada, said the company was pleased with Silcoff’s ruling.

"On every point of contention, the court ruled in favour of BCE," Turcotte said quick payday. "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."

A ruling in favour of the bondholders could have added costs and possibly threatened the deal.

The decision is expected to be appealed, with the bondholders facing a March 17 deadline for such a move.

The deal has already received the blessings of U.S. authorities and Canada’s Competition Bureau. BCE shareholders overwhelmingly voted to accept the consortium’s $42.75-a-share offer in September.

The CRTC began hearings into the matter last month. The hearings have been adjourned.

CRTC chair Konrad von Finkenstein raised concerns during the hearings that the deal could lead to a "paper compliance" worth Canadian foreign-ownership restrictions.

Silcoff waded through thousands of pages of evidence and testimony created during the two-month hearing in his Montreal courtroom.

Lawyers for the bondholders argued BCE directors were kept in the dark by managers and advisers who manipulated the bidding process to freeze out bondholders in the sale of the company.

They claimed BCE advisers, notably investment banker Goldman Sachs, urged the Ontario Teachers’ Pension Plan to change the structure of its bid just days after it was submitted on June 26 in order to win the favour of the board.

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