Wednesday, January 9, 2008

BCE objects to Catalyst being allowed to intervene at CRTC hearings into sale


Wednesday, January 9th, 2008
Ross Marowits
CANADIAN PRESS

MONTREAL - Canada's telecommunications regulator should review all alternatives to the proposed sale and privatization of BCE Inc. (TSX:BCE), the head of failed BCE bidder Catalyst Asset Management said Wednesday.

"This deal as presently constituted defies many of what the Telecommunications Act's policy objectives are," Brent Fullard said in an interview as it engages in a battle with BCE to present his case directly to the CRTC.

"Because it is a suboptimal outcome for the CRTC, it's incumbent on them to ask, were there other possible outcomes that were available contemporaneously to the company that were in fulfilment of not only the company's goals but in greater fulfilment of its policy objectives."

Fullard sent a letter to the federal regulator, dated Jan. 8, arguing the proposed sale to a consortium led by the Ontario Teachers Pension Plan is not in the interests of Canadians because it fails to achieve the legislated objectives of the Bell Canada Act and Telecommunications Act.

The way in which BCE conducted itself was designed to frustrate other viable transactions what would have better met the policy objectives of the two acts, he wrote.

It would also cost the federal government nearly $800 million in annual taxes.

On Jan. 4, BCE filed its objection to Catalyst's intervention at Feb. 25 hearings scheduled by the Canadian Radio-television and Telecommunications Commission.

BCE argued among other things that the grounds for Catalyst's intervention are beyond the scope of the inquiry, its allegations are best dealt with by the courts and securities regulators, and the regulator should not second-guess the appropriateness of the winner of a bidding process.

It also accused Catalyst of pursuing its intervention for "collateral purpose."

"The nature of a recapitalization proposal that was rejected by a validly constituted board of directors is entirely irrelevant to both the current proceeding and the Commission's statutory mandate...," wrote David Elder, vice-president regulatory law.


Catalyst's 11-page letter to the CRTC
addresses each of BCE's objections.

Although BCE accused Catalyst of potential gain, Fullard said senior management, directors and others will earn hundreds of millions of dollars from the deal.

He charges that BCE failed in their securities obligations to disclose the Catalyst offer to shareholders.

BCE's objections are "self-serving and further evidence of their attempts to obfuscate the existence or a superior transaction," he said.

BCE shareholders have endorsed the all cash $42.75 per share offer by Ontario Teachers and its partners.

The deal, which is now slated to close in the second quarter of 2008, somewhat later than originally expected because of the hearing, is subject to approval by the CRTC and resolution of a lawsuit filed by two disgruntled sets of bondholders.

6 comments:

Anonymous said...

It's no surprise that BCE wants to prevent the CRTC from hearing what Catalyst has to say. That's because the Catalyst Proposal is veatly superior to the Teachers' deal.

BCE doesn't want the CRTC to hear what BCE didn't want their shareholders to know about, which is why BCE failed to disclose to their shareholders the terms of the catalyst deal.

Who benefits from that? Who benefits from Catalyst not intervening before the CRTC?

Correct BCE Management who syand to gain over @200 million in collateral benefits from the Teacgers deal. That's $200 million more than under the Catalyst Deal.

The Catalyst deal preserves BCE as Canada's most widely held public company with over 80% Canadian ownership.

Meanwhile the Teachers deal results in four owners, three American.

So how could the CRTC possible approve the Teachers deal in the presence of the Catalyst deal, when the Telecoomunications Act that the CRTC enforces has the following explicit policy objective?:

"To promote the ownership and control of Canadian [telecom] carriers by Canadians"

Meanwhile Catalyst preserves BCE as an investment grade credit borrower as opposed to the junk bond issuer under the Teachers deal. How will that gove rise to this explicit policy of the Telecommunications Act?:

"To enhance the efficiency and competitiveness of Canadian telecommunications"

Obviously BCE Chairman Richard Currie (of Loblaws fame) thinks he can turn the sale of Canada's largest telecommunications carrier into an exercise in "President's Choice" or the "Insiders Report"

Give your head a shake

Dikaios said...

There's justice, and then there's natural justice.

Justice is all about the pushes and shoves under, and as permitted by the rule of law, as turned or twisted by the knack of making the weaker look stronger, and the stronger weaker.

Natural justice says “Let the future decide what is and will be just. Let the child of born of deceit live and die by the sins of the deception.”

Ontario Teachers and its private equity running dog have assumed that the franchise of BCE will be a cash cow forever—or at least as long as is needed to crystallize bonuses and pension top ups.

There is today a box that can be bot for under $1000, which runs on the Web and eliminates the need of the traddy land phone. Next box: wireless.

Who will backstop the future billions of capital losses from BCE?

There's justice, and then there's natural justice.

Dr Mike said...

Had I been a shareholder of BCE would I ever be pissed-off by what has occurred.

Do not the shareholders have the right to decide upon which deal they would like to accept--all choices must be presented & not just the ones that the directorship deems presentable.

In this case it is obvious that the board at BCE picked the choices that would maximize their own benefits & not those of the shareholders.

The federal gov`t didn`t let out a squeak about this sale--they will receive a huge one-time tax benefit from this transaction due to the incursion of large capital gains by the shareholders.

Of course , once again the gov`t is in it for instant gratification having lost sight of the long-term benefits of BCE remaining public & developing a sizable tax stream.

And who knows what role our future head of the Bank of Canada may have played in this sale--it appears that his former(?) employers , Goldman Sachs will gain just over 48 million dollars from the sale as it is set-up at present.

There have been too many hands in the cookie jar in this case to have developed a fair deal.

Once again it is the shareholders & the Canadian public who will suffer--Harper`s chosen elite again comes out on top.

Dr Mike.

Anonymous said...

Brent Fullard writes:

The Globe and Mail acts as an instrument sympathetic to its owners' interests, less sympathetic to Canadians

The above article by Ross Marowits of Canadian Press affords a rare occasion to observe how it is that the Globe and Mails acts in a manner that is sympathetic to the interests of its owners which, incidentally, is endemic to how the CTVglobemedia empire have handled the income trust issue.

Not to worry since as a Canadian I place my trust in institutions like the Canadian Nuclear Safety Commission and the CRTC, to a lesser extent Parliament but certainly not the Canadian main stream media (with limited exceptions, however).

Here is an interesting “laboratory” experiment in media involving a double-blind placebo test. Yesterday’s article by Ross Marowits of news provider Canadian Press was picked up by about 15 news outlets including CBC, Macleans, Canadian Business and others. They carried the story in its full original form, as written.

Meanwhile the on line service of the Globe (owned by BCE and Teachers’) also picked up the story, but felt the need to change the title from’ “BCE objects to Catalyst being allowed to intervene at CRTC hearings into sale” to “CRTC urged to review alternatives to BCE sale”. The difference in the set-up is that BCE goes from being the “bad guy” tp simple being a passive party. The article goes on to describe how BCE wrote to the CRTC objecting to an intervention by Catalyst at the Publc Hearings being held to review the proposed BCE sale to Teachers’.

The central line of my argument was: "This deal as presently constituted defies many of what the Telecommunications Act's policy objectives are," Brent Fullard said in an interview as it engages in a battle with BCE to present his case directly to the CRTC.
"Because it is a suboptimal outcome for the CRTC, it's incumbent on them to ask, were there other possible outcomes that were available contemporaneously to the company that were in fulfillment of not only the company's goals but in greater fulfillment of [the CRTC’s] policy objectives."

The Globe version of Ross Marowits’ article then ended on a high note for BCE by deleting the last six paragraphs of the article.

Here are the last two paragraphs of the Globe truncated account of the CP article:


[BCE] also accused Catalyst of pursuing its intervention for "collateral purpose."

"The nature of a recapitalization proposal that was rejected by a validly constituted board of directors is entirely irrelevant to both the current proceeding and the Commission's statutory mandate...," wrote David Elder, vice-president regulatory law.


And fails to include the following six paragraphs:


“Catalyst's 11-page letter to the CRTC addresses each of BCE's objections.

Although BCE accused Catalyst of potential gain, Fullard said senior management, directors and others will earn hundreds of millions of dollars from the deal.

He charges that BCE failed in their securities obligations to disclose the Catalyst offer to shareholders.

BCE's objections are "self-serving and further evidence of their attempts to obfuscate the existence or a superior transaction," he said.

BCE shareholders have endorsed the all cash $42.75 per share offer by Ontario Teachers and its partners.

The deal, which is now slated to close in the second quarter of 2008, somewhat later than originally expected because of the hearing, is subject to approval by the CRTC and resolution of a lawsuit filed by two disgruntled sets of bondholders.”

Which also begs the question. Why is the Globe not reporting on the landmark case that is going on I Montreal between the two BCE bondholders groups who are suing BCE for oppression as a result of the Teachers’ deal. A lawsuit that would have been unnccessary under the Catalyst deal. Since the Catlyst deal surfaced value without damaging other stakeholder groups like the bondholders, the tax collection of Ottawa or the policy objectives of the Telecommunications Act or the Bell Canada Act. Perhaps that isn’t news worthy, since BCE is only Canada’s most widely held public company (and would only remains so under the Catalyst Proposal).

BTW: The Catalyst letter to the CRTC and the BCE letter to the CRTC are available at www.canadiansolution.ca

Anonymous said...

Ahhhhhhh .. Brent does have a day job!

Jane Doe said...

As a small shareholder of BCE I voted against teh purcahse of teh company by Teachers' and a group of rabid Americans financiers. The Catalyst proposal would be much more profitable to shareholders in terms of both capital appreciation and future investement income. Moeover governemntal tax revenue would have been very substantail. Every Canadian citizen and shareholder would have benefited. It is sickening to see the Globe and Mail, Canada's so-called national newspaper, to break every principle of ethics by editorializing and trunkating a Canadian Press report. Editorializing the news is totally unprofessional. I lived in Eastern Europe during the Soviet era where the news was constantly eidtoriazed by the communists. But we are in Canada here, right?