Shares of BCE Inc. (TSX: T.BCE, Stock Forum) were in free fall in early afternoon trading Wednesday on news that the company’s leveraged buyout deal is likely dead.
Shortly after noon, the price had plummeted almost 36%, or $13.77, to sit at $24.58 on volume of more than 32 million.
The share value is now perilously close to the 52-week low of $23.
BCE Inc. announced Wednesday that its $34.8 billion leveraged buyout, the largest in history, is unlikely to close as scheduled next month, after accountants determined it wouldn't meet a solvency test due to the huge debt load involved in the deal. It is the latest development in a saga that stretches back for more than 18 months.
Analysts and industry sources also say that Telus will not bid for its rival in the wake of a failed buyout. Telus negotiated with BCE in the summer of 2007 but never made an offer for BCE, in part because of regulatory concerns.
There was plenty of reaction on the Bull Board Wednesday.
“Now that’s Manipulation...,” said yahearme.
“Now holding out on this news at the last minute is just plain Manipulation and smacking the honest investor in the KISSER at the last minute. Just when one wonders when investing in the market is really an honest man’s game. Someone should be held accountable.”
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what a mess from start to finish...,” added specboy. “The whole financial industry has become an embarrassment to mankind. I feel for the holders, as this is NOT the endgame that they truly deserved.
“Average down, get the one-time payout, wait for the next offer, and exit stage left. Cancel all BELL utilities, and collectively run this POS into oblivion....which is what it deserves.”
The gloom wasn’t universal, though.
“Great NEWS !!!!!,” exclaimed HCI_STEEL.
“Those of us that wanted to hold this are VERY happy. I would have had to sell other stocks to offset the capital gains BCE would have triggered!!! Now I can sit back and collect the divi's again. Those who were going to donate the stock to avoid the CG's will reconsider so that will hurt universities and other charities.
“If the deal falls thru there is no way shareholders would vote to renegotiate the price as that starts the whole 2 year process over again. I don't think any shareholder wants to go thru that rollercoaster again!
“Suppose Teachers could come up with more cash to reduce the amount borrowed which would bring the 'solvency' formula post transaction into line. Not sure if the banks have a say in the solvency req but Teachers could waive it if they still believe in the deal. They better not risk trying to renegotiate the price since shareholders will have no appetite to revote (required), then watch all the court challenges etc all over again.
Angturil saw it as a buying opportunity.
“Yay, $24 shares!,” he or she exulted.
“Yes, I bought more, though I fear a margin call bounce off $18. The deal is still going to happen though... This is really quite amusing.”
“I think that with or without the deal, $24 is a good deal. What may make it more interesting is the potential dividend.
“On the overall this mess may throw the market in a bigger loop for a while, we may also find out in the future that some politicians/ bankers made some behind the seen calls to get some accountants to reach the conclusion that the deal is not viable.”
In “RE: 16 Bucks!!!,” angturil added, “16-18 is very possible tomorrow... so is 38... welcome to the BCE rollercoaster.
“Most of the big players are still in atm. But... those on margin might get hit hard. Large investment houses rarely margin their holdings that way, so shouldn't be a problem for them.
“I'm predicting the price may be volatile! and I'm still long. Position WAAAAY bigger now.”