Wednesday, June 20, 2007

TELUS and Bell Canada Consider Merger Possibility

BCE, the parent company of Bell Canada, and TELUS, the incumbent operator in western Canada, confirmed that talks are underway regarding a possible business combination. BCE and TELUS have entered into a mutual non-disclosure and standstill agreement on a non-exclusive basis.

In a press statement, TELUS said a combined TELUS/BCE could:

  • Create a combined organization poised for improved growth and returns through the realization of significant operating synergies to the ongoing benefit of TELUS and BCE investors

  • Retain investment grade credit ratings thereby retaining financial strength to invest in long-term growth with the associated public benefits related to innovation and productivity

  • Preserve and enhance a public Canadian investment vehicle for ordinary Canadians and institutional investors

  • Ensure access to leading edge technology, services and devices for the benefit of Canadian consumers and the competitiveness of businesses

  • Allow current BCE shareholders to participate in ongoing value creation on a largely tax deferred rollover basis which would be attractive to the many BCE shareholders with a low tax cost basis

  • Preserve an income tax base for Canadian governments that would otherwise be eliminated by highly levered private equity structures with non-taxable equity holders and U.S. sourced debt

  • Be the most likely strategic alternative to preserve long-term Canadian control if foreign ownership restrictions are removed

  • Establish a truly national telecommunications company, similar to other G8, European and Commonwealth countries (e.g. British Telecom, France Telecom, Deutsche Telekom, NTT, Telecom Italia) in an industry critical to national sovereignty.
  • In April 2007, BCE announced a series of discussions with a group of leading Canadian pension funds to explore the possibility of taking the publicly-traded company private. This group will be led by the Canada Pension Plan Investment Board (CPPIB), the Caisse de depot et placement du Quebec and Canada's Public Sector Pension Investment Board (PSP Investments), who have signed a non-disclosure and standstill agreement with BCE on a non-exclusive basis. Kohlberg Kravis Roberts and Co. (KKR), a leading global private equity firm, has also signed the agreement and will join the Canadian-led consortium as a minority partner.

  • BCE controls Bell Canada, Telesat Canada and an interest in Bell Globemedia.