Tuesday, January 29, 2008

Tom D'Aquino opines on BCE leveraged buyout

Tom D’Aquino of the CCCE felt the need to intervene with the CRTC on behalf of CCCE Member and CCCE Director, Michael Sabia, who also just happens to be the CEO of BCE and the individual who, for all intents and purposes, ran the BCE "auction" which was widely criticized.

See D'Aquino intervention here, under 2007-19

Here is D’Aquino’s flawed logic contained in his intervention. None of which, incidentally, relates to any of the Acts that the CRTC is duty bound to enforce:

“The proposed transaction approved by the majority of shareholders (Editor's note: actually 61%) of BCE, is a reflection of the market’s preference. The market should be allowed to prevail, subject to existing Canadian ownership and control requirements. To that end, I am indicating the CCCE’s support for the above-noted application by BCE Inc, related to its proposed transaction to change its ownership."

Rebuttal: How reflective of market forces governing the outcome of the BCE sale process is the following, as reported by Canadian Press?:

“The directors of BCE Inc. were kept in the dark about offers for the telecom giant by managers and advisers who manipulated the bidding process to freeze out bondholders in the sale of the company, lawyers for the bondholders said Monday.”

"Tom O'Neill, Jim Pattison and Donna Kaufman, the head of BCE's strategic oversight committee - testified they were unaware or couldn't remember seeing all the details of the bids or how they would affect all stakeholders."

How can Tom D’Aquino claim to know what the market’s true preference was, when BCE failed in its disclosure obligation to tell its shareholders about the Catalyst Proposal?

Is this the CCCE’s idea of good corporate governance and the free flow of efficient capital markets? Is this the CCCE's idea of how a Board of Directors of Canada's most widely held public company should function? Or any Board for that matter in fulfilling their fiduciary duty?If so, the CCCE has no credibility. If not, they should retract their stated support of the BCE takeout, in light of new unseemly information.

“The objective of the major investor, Teachers’ is to strengthen a Canadian enterprise in pursuing strategies for growth and value creation”

Teachers is not the major investor. They are only providing $4 billion of the acquisition price of $32 billion, of which the $26 billion in junk bond financing makes the new bondholders (Citibank, Deutsche Bank, Royal Bank of Scotland, etc.) the largest investors. See attached deal sheet from Teachers. The result is that BCE will become the most debt levered telecom company in the world with 3.6 times the Debt:Equity leverage of the average Telecom company. How will this help BCE grow as D’Aquino claims. More likely to default or divest. Meanwhile Tom D”Aquino should acquaint himself with the following articles and brush up on a few facts before putting pen to paper:

BCE Buyers May Have to Sell Wireless Unit to Pay Debt (Update2)
By Chris Fournier Bloomberg
January 15, 2008

Teachers' says bondholder win would threaten BCE buyout
By Carrie Tait, Financial Post
January 20, 2008

Not the straw but the camel
By Peter Foster, Financial Post
January 23, 2008

BCE objects to Catalyst being allowed to intervene at CRTC hearings into sale
By Ross Marowits Canadian Press
Jan 9, 2008

1 comment:

Anonymous said...


"Catalyst's Bell Bid Silenced" in today's Financial Post: