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Canada's BCE in $32.6 Billion Private-Equity Buyout

BCE, Canada's largest telecommunications group, announced the biggest buyout in Canadian corporate history on Saturday, accepting an offer worth C$51.7 billion ($48.5 billion), including debt, from a group including the Ontario Teachers Pension Plan.

BCE said its board recommended that shareholders accept the C$42.75 a share offer from the consortium, which includes the pension plan's investment arm, Teachers Private Capital, as well as Providence Equity Partners and Madison Dearborn Partners.

Excluding debt the deal is worth $32.6 billion.

The buyers will take BCE private, changing the ownership structure of a blue chip corporation described as an investment for widows and orphans because of generous dividend payments.

"This represents very, very substantial value for our shareholders," Chief Executive Michael Sabia told a conference call announcing the deal. He described the price as "compelling" and said it was a good deal for private and institutional investors.

The group including Teachers Private Capital was one of several competing for BCE, which is known for its Bell Canada phone services and for media interests grouped in CTVglobemedia, part owners of the national Globe and Mail newspaper.

Boutique investment bank Catalyst Asset Management, which put in a bid spurned by the BCE board, urged shareholders to vote for its proposal, which it said was worth between C$42.50 and C$52 per BCE share.

Largest Single Stakeholder

Teachers was already BCE's largest single shareholder, with a stake of some 6 percent. BCE said Teachers Private Capital would own 52% of the company if the deal goes through, meeting Canadian rules that telecommunications firms are majority-owned by Canadian firms.

Providence would hold 32%, Madison Dearborn 9% and other Canadian investors would hold 7%, a BCE company statement said.

Telecommunications group Telus , one of BCE's main Canadian rivals, had also expressed interest in the auction, but pulled out this week, complaining about bidding rules.

BCE executives insisted that the bidding had been fair and transparent, although they admitted there had been unique issues in dealing with a direct competitor like Telus, including working out how to share confidential information.

Talks with the three bidders ran through Friday night, with the deal early Saturday, Sabia said.

He said the Teachers' offer would leave Canadian consumers with a more competitive landscape than would have been the case if BCE merged with Telus. But he admitted Telus might yet come back with its own, sweeter bid.

"Our board has ... obligations to continue to be open to a superior proposal, should a superior proposal arise," he said.

Sabia said the Teachers' offer was a 40% percent premium over the share price before BCE put itself up for sale, and he expected the deal to close in the first quarter of 2008. BCE shares closed at C$40.34 in Toronto on Friday.

"The all-cash transaction is valued at C$51.7 billion, including C$16.9 billion of debt, preferred equity and minority interests," BCE said.

The transaction, which must still be approved by regulators and by BCE shareholders, includes a break fee of C$800 million payable by BCE in certain circumstances if the deal falls through, and a reverse break-up fee of C$1 billion that would be payable by the buyers.