How the Bell Canada Deal Got Done

The NYT’s Ian Austen has a fascinating article today about, to quote his headline,

"The

Winding Road to a Giant Deal to Sell Bell Canada". It seems that the

biggest buyout in history came as a result of an auction run idiosyncratically

by the target company, in conditions of no little secrecy and mystery.

I’m sure that a long article will be written at some point about exactly what

happened. But the two opposing views are already clear, and they’re held not

only by participants but also by neutral investors. While GlobeInvest Capital

Management’s Peter Breiger is quoted in the NYT as saying “Oh

dear, oh dear, oh dear,” Guardian’s Gavin Graham is quoted

in the Globe and Mail as saying that "It’s certainly a very generous

offer," and that "it’s difficult to see any other private equity bidder

being able to match that with a straight face."

It seems that BCE controlled the bidding process much more tightly than is

normally the case in takeover situations. Because Canada’s takeover rules say

that a Canadian bidder has to retain majority control, BCE was scared that all

likely Canadian bidders would team up into a consortium, thereby making a competitive

bid much more difficult. So the company "took it upon itself to tell would-be

owners who they could, or could not, bring in as partners," according to

the NYT.

The final bid certainly looks as though it’s fully valued, and in general one

shouldn’t read too much into the fact that rival bidders dropped out at the

last minute and are now complaining loudly to anybody who will listen. Such

complaints are relatively common from alpha-male private-equity types who hate

to lose anything. On the other hand, the enormous number of advisers involved

in the process, as well as its extraordinary opacity, make it quite easy for

the buck to be passed endlessly from one person to another if, as alleged, BCE

managers did have an ulterior motive of keeping themselves in place and personally

making as much money as possible.

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