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Top Court OKs Bell Canada Takeover, But Price Is An Issue

Investment banking analysts speculated that the proposed $35 billion takeover price would be revised because of the generally deteriorating financial climate.
Prospects for the leveraged buyout of Bell Canada -- billed as the biggest buyout ever -- have brightened after a favorable ruling by the Supreme Court of Canada. But the deal's price tag may shrink.

In a response to the court's ruling late Friday which overturned a lower court opinion, shares of the telecom company known as BCE surged more than 10 percent to $38.12 Monday morning. But that was lower than the $42.75-a-share price that had been set for the acquisition by the Ontario Teachers Pension Plan Board and its partners, which include Providence Equity Partners, Madison Dearborn Partners, and Merrill Lynch Global Private Equity.

Investment banking analysts speculated that the proposed $35 billion takeover price would be revised by the banks financing the deal because of the generally deteriorating financial climate. Analyst Joseph MacKay of Desjardins Securities said he expects the banks to push for an 8% cut, which would bring the price to $39.25, according to a report in Canada's Globe & Mail.

BCE hailed the court decision, but served notice it doesn't want to budge on the price. "With this decision by the Supreme Court and the confirmation of regulatory approvals we are now in a good position to complete the transaction," said Richard J. Currie, chair of the BCE board, in a statement. "We expect all parties to the transaction will honor their commitments."

BCE said it expects the deal to close in the third quarter rather than at the end of this month, because of the legal delays. Negotiations among all the concerned parties are continuing and, while most are saying they will honor their commitments, the price represents a hurdle.

In overturning last month's Quebec Court of Appeal ruling, the Supreme Court sided with BCE stockholders over the firm's bondholders, who had challenged the takeover. The high court didn't issue an opinion explaining the rationale behind its ruling and the bondholders said they couldn't discuss the ruling, because the court didn't disclose its reasoning.

The total value of the buyout remains at about $52 billion, which includes debt. BCE is Canada's largest telecommunications company.