BCE confirms talks with pension funds

In an about-face regarding its future business prospects, BCE Inc. announced this morning that it's talking to a group of Canadian pension funds and a US-based private equity firm about taking the company public.Mere days after saying no such talks were taking place, Canada's largest telecom services provider said in a press release that it "is reviewing its strategic alternatives with a view to further enhancing shareholder value." Part of the review includes discussions with the pension fund group, led by the Canadian Pension Plan Investment Board CPPIB), the Caisse de dépot et placement du Québec, and Canada's Public Sector Pension Investment Board (PSP Investments). BCE said the organizations have signed a non-disclosure and standstill agreement on a non-exclusive basis. Kohlberg Kravis Roberts and Co. (KKR), a private equity firm, has also signed on as a minority partner.The CPPIB confirmed the news in a separate press release. "We look forward to working with BCE and our consortium partners as we proceed with the due diligence process," said David Denison, the investment board's CEO.BCE said the announcement shouldn't be taken as a done deal. "No assurances can be provided that this continuing review of alternatives will result in any specific action," read the press release.Late last month the Globe and Mail reported that BCE was discussing a buyout with KKR and a group of pension funds that would take the company private. But BCE said no such talks were occurring."It took them long enough to finally tell the truth," said Lawrence Surtees, a telecom analyst at IDC Canada Ltd. in Toronto. He pointed out that reports about the rumoured discussions were too detailed to be just speculation. "Where there's that kind of smoke, there's serious fire."He also said the talks indicate that BCE's board of directors isn't happy with the company's performance - that the firm seeks a new financial support structure is a signpost that BCE is "languishing." "It's a huge vote of non-confidence in Bell's management."BCE is special not only for its scope of operations - it's the nation's largest phone service provider - but also for its financial spread: it's the most widely Canadian-owned corporation. More Canadians own a piece of BCE than of any other company. According to Surtees, the firm should step carefully when discussing its options.Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada (CEP), said it's too soon to decide if BCE's talks with the pension funds are good news or bad news. On one hand, the funds involved aren't known for acting like other investment institutions. "They're not your classic break-up specialists." Under their ownership, BCE might fare a better chance of remaining single corporate entity.On the other hand, no one knows how big a role KKR would play. It's a US firm, and the CEP is worried that greater foreign ownership of Canadian communication companies would negatively affect the nation's culture, heritage and national security, Coles said.

BCE confirms talks with pension funds

News | April 17, 2007

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