Battered BCE shares move higher as deal doubts linger
BCE 3-month chart
Shares of BCE Inc. recovered some lost ground Friday, a day after they plunged 12 per cent following a court ruling that cast doubt on whether the takeover of the telecom would proceed.
The shares ended the day up 96 cents at $33.60 on heavy volume of more than 14.5 million shares. On Thursday, the shares slid by $4.48 to $32.16, slashing the market value of BCE by almost $3.6 billion.
Trading in the shares went smoothly on Friday. On Thursday afternoon, a glitch forced a trading halt in the company's stock on the TSX after the exchange discovered "a trading message protocol issue" that raised concerns about data integrity.
The Globe and Mail reported Friday that BCE and the investors group wanting to buy the telecom — led by the Ontario Teachers' Pension Plan — was not planning to negotiate with bondholders who'd mounted the court challenge and won. The Quebec Court of Appeal ruled that BCE had not taken the interests of Bell bondholders into account during the takeover process.
The newspaper, quoting unnamed insiders, said BCE and the buyers are instead counting on the Supreme Court to reverse Wednesday's appeal court ruling and allow the takeover to proceed.
BCE files appealBCE filed a formal notice of appeal with the high court on Thursday, requesting an "expedited" hearing.
Observers said the timing of the Supreme Court's decision could be as critical as any potential ruling. After June 30, the buyout consortium can choose to walk away from the deal without paying a reverse break fee that some reports say could be as high as $1 billion.
"In our view, the market will focus on this fact now that it is clear all of the conditions for the definitive agreement will not be met by the [June 30] date," said National Bank Financial analyst Greg MacDonald, who thinks a Supreme Court decision could take as long as eight months.
For its part, the Ontario Teachers' Pension Plan said it remains "committed" to the deal, a spokesperson told CBCNews.ca.
After November, the banks can also drop out of the deal because they would no longer be contractually bound to provide the financing. There were reports last weekend that banks were actively trying to rework the terms of the BCE deal, seeking higher interest rates and more protection.
Borrowing billions of dollars wasn't a problem when the BCE deal was arranged in June of last year. But the credit crunch that began roiling markets just two months later made it much more difficult for banks to raise money.
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