Thursday, June 26, 2008

Who needs Morgan McCague now that we have Red Wilson?

By: Brent Fullard
Catalyst Asset Management Inc.

Morgan McCague is the token shareholder that Teachers’ ham-handedly used to get around its 30% investment limit under pension regulation whilst simultaneously (?) satisfying the 50%+ control provisions of the CRTC in acquiring BCE.

As I had predicted a year ago, the Red Wilson panel would be recommending relaxed foreign ownership of regulated industries in Canada such as telecommunications. They did that very thing in today’s report.

This was an eventuality that Catalyst Asset Management addressed in its letter to BCE’s board dated June 25, 2007 where I indicated this was a very inopportune time for BCE shareholders to sell , since the pending relaxation of foreign ownership of BCE would mean higher values would be attainable in the broader auction that would occur if foreign ownership of BCE were to be relaxed.

Perhaps I was speaking over the head of the BCE board with the words in the letter that read: “no “frictional costs” or involuntary loss of a latent value to a third party, as full equity value of BCE is retained by existing shareholders”.

That was my delicate way of saying don't repeat the mistake you made by selling Yellow Pages to US private equity via an LBO at 50 cents on the dollar.

As for Morgan McCague, his services will soon no longer be needed, since US private equity firms Providence Capital Partners, Madison Dearborn and Merrill Lynch will soon be able to buy a company like BCE without the trouble and inconvenience of partnering up with a token Canadian Pension Fund like Teachers’

Whoopee. Just in time for the LBO of Telus

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