BCE takeover – only a matter of time

Reflect for a moment on the events leading up to the rumours this morning that KKR is in talks to take BCE private for at least $30 billion, likely in conjunction with OTPPB. The ironies abound:

– for all of the gnashing of teeth about leaky M&A deals, even this one leaked before folks were ready (if the rumour is actually legit and not a would-be Jim Cramer at work, trying to get off a long position);
– when the federal government ended the income trust craziness last October, one of the predicted byproducts was a series of going-privates of the firms that were i) spurned, or ii) already income trusts but lacking a market following, growth capital or even a reason for being public;
– once icons such as Falconbridge, Inco, Four Seasons, Fairmont Hotels and Dofasco were slipped out of the country in someone’s suitcase, foreign buyout firms clearly have figured out that the current government is not about to reinstate the Foreign Investment Review Agency, or anything like it;
– the fact that BCE shares have dramatically underperformed Rogers and Telus ensures this deal will be welcomed by such tired shareholders as CalPERS, who were BCE CEO Michael Sabia’s white night a few short years ago when they called-in a $400 million equity order at ~C$24 (as at June 30/06, that 16 million share block appears to have been reduced to just 902,000). BCE used that lead order to put together a massive equity offering at a time when the business needed it in 2002. Looks like the Cali boys got tired of having to live off their divi, in the absence of much capital appreciation, and ditched most of those shares;
– what will the BCE Board do on the disclosure front, in light of the pain being unfairly wrought against talented lawyer Debbie Weinstein, for example? Her alleged mistake? She didn’t recommend that her client AiT tell the capital markets that a potential deal might actually, maybe, if we agree on price/terms/structure, come to pass.

As you follow the crumb path, you get the sense that this transaction is inevitable. But the sideshows will be interesting to watch in the meantime.

MRM