Following an announcement Thursday morning by Montreal-based BCE (TSX: T.BCE, Stock Forum) that the $34.8 billion leveraged buyout would not be proceeding, discussion was lively on the Stockhouse Bullboard on the subject of the news and the dividend.
Thursday morning, BCE reported that it received a notice to terminate the definitive agreement from the purchaser, a company formed by an investor group led by Teachers' Private Capital, the private investment arm of the Ontario Teachers' Pension Plan.
The close of the transaction was contingent upon certain conditions, including a positive solvency opinion from KPMG. BCE says that earlier this morning, KPMG confirmed that “it would not be able to deliver an opinion that BCE would meet, post transaction, the solvency tests set out in the Definitive Agreement.”
The company announced late last month that it received a preliminary view from KPMG saying that it does not expect to be in a position to deliver an opinion that BCE would meet the solvency tests on December 11, the scheduled effective date of BCE's privatization. At that time, BCE did note that should KPMG be unable to deliver a favourable opinion on December 11, “the transaction is unlikely to proceed.” Back on November 26, the company’s shares plummeted 34%.
BCE says that it “disputes that the Purchaser was entitled to terminate the Definitive Agreement, as such notice was delivered prematurely, prior to the outside date for closing of the transaction, and therefore invalid” and is demanding payment of the $1.2-billion break-up fee.
The purchaser responded Thursday morning, saying “it is most unfortunate that BCE is threatening litigation over the failure of a mutual closing condition that the company insisted be included in the original acquisition agreement. It is very clear that neither party has a right to a termination fee in these circumstances. Should BCE commence such baseless litigation, we are confident that it would not succeed."
After the agreement is terminated, BCE says it will “address a reinstatement of its common share dividend” and return capital to its shareholders through a normal course issuer bid.
Shares of BCE fell 3.6% to $22.19 Thursday.
On the Bullboard, dontyaknow commented:
“Yield at 6.5% with re-instated dividend and more to come. Great buy in this environment IMO. BCE a great company and shares have been hit hard with the downturn[sic].”
themangokid said:
unless I am mistaken they haven't announced the record date. Pretty cunning, I think. Along with not specifying the dividend amount, I think this is making prospective sellers maybe a little hesitant about just dumping at market for fear of missing a bigger than expected payout. In my opinion the the ex-div date wont be any time within the next few weeks. I dont think BCE would want to reward people for selliing cuz the deal is dead[sic]
gwplant replied:
“Good point and why should they reward the in and outers today for selling ?? Even if the ex div date turns out to be today I believe its the end of business to qualify and even if it is today its good the company is holding this info to their vest hope more of the fly by night takeover buyers get scorched even further, I am happy with my investment in a great Canadian company and holding for the future[sic].”
