The deal makes sense Moving the 6B from the sale of NwT and MLSE (which were not generating much)
Could have
A) paid of debt - good use of funds as the company delevarges
B) bought back shares - very good use of funds since the shares are at significant lows they would have bought at a discount relative to the last 5 years
C) expand ...
Which of these is the best choice (A brings interest savings B improves per share metrics C offers revenue growth)
Personally I like them in the order of (C, A, B)
Revenue growth is very important as it offers opportunities of scaled reductions to OpEx (which is the real problem in commodity based products).
Now I know on the surface we see the 13.5 multiple to EBITA but that's a value that is in fluxuational growth, as the market penetration increases the EBITA increases and the multiple goes down. The important part of the puzzle is the nature of that growth.
Before this deal BCE did not have the capacity to grow in this market, now they do.
They didn't just acquire the fiber and networking infra, the relationships with the community, the brand recognition, the goodwill... they acquired a significant capability (the ability to do business in the USA).
That is a very important asset, the company culture and processes to do business in 4 states, the payroll, legal, supply chain, taxation, etc
This capability will act as a vanguard to the market that will allow for continued capital deployments.
The company they are aquiring is worth their premium, likely in large part to the oversight provided by the trio of top investment partners including CPP. The company has great technology (50GBs fiber), a fairly lean operations (1000 employees), an incremental cost effecient product (little worry about large inventories depreciation), and a head start in an underserved market.
The sales pitch for Ziply is pretty compelling.
What I am wondering is what do those pension plans do next, do they make a play to privatize BCE at $55 a share?
when I look at the moves being made I see company leaning up and positioning for sustained profitability.