BCE's selective disclosure

BCE's selective disclosure

Barry Critchley,
Financial Post
Wednesday, December 10, 2008


In the lead up to tomorrow's deadline for the privatization of BCE -- the proposed $50-billion-plus transaction led by Ontario Teachers' Pension Plan Board -- the company's investor/ media relations team has been very busy. Some wish they had been as diligent in the middle of last year.

Consider the events of last Friday, when BCE issued a statement "in response to certain rumours reported in the media regarding a possible minority investment in the company by some or all of the investor group led by Teachers' Private Capital."

BCE added that while it is BCE's policy "not to comment on rumours or speculation, in the interest of its shareholders, BCE is today confirming that no such offer has been made to the company." The company, whose shareholders were set to receive$42.75 a share tomorrow, added it "continues to work with KPMG and the purchaser to seek to satisfy all closing conditions under the June 29, 2007, definitive agreement, as amended."

Well done. The company updated the market, but let's look a bit deeper.

BCE informed the market about a possible transaction that hadn't been presented to the company.

BCE's position of Dec. 5, 2008, stands in contrast to its mid-2007 position when it chose not to acknowledge that it had received a real offer.

On June 22, 2007, Catalyst Asset Management made an offer to restructure BCE using stapled securities. Known as the Canadian solution, Catalyst said it would preserve Bell Canada as a broadly held standalone Canadian-owned and controlled public company, while BCE's existing shareholders would receive all the company's future growth potential. "The Canadian Solution will put all of Bell Canada's shareholders, both large and small, on a more equal economic footing. Most importantly, the Canadian Solution would permit all existing Bell Canada shareholders to achieve a full valuation for their shares by recapitalizing the resulting company in a value-maximizing manner," the release added.

And the solution would "be done in a manner and on terms that are not oppressive to existing Bell Canada preferred shareholders and bondholders."

Certainly Catalyst liked what was being offered. Indeed the firm even had some conversations with members of BCE's strategic oversight committee, plus their advisors.

But BCE failed to disclose that interest in any of the material it mailed to shareholders. Instead, the circular devoted pages to the offer from Ontario Teachers, from the discussions it had with Telus and from earlier discussions with a CPPIB-led consortium and a Cerebus-led group.

The irony: Last year BCE chose not to make any reference to an offer it had received, an offer that was taken a few steps forward. In 2008, BCE has gone public about an offer it hasn't received.

As one wag wondered yesterday: is this a double standard of disclosure?

Calls to BCE seeking a comment were not returned.