OTTAWA (Reuters) – Canada's largest telecom company, BCE Inc., won the backing of the Supreme Court of Canada on Friday to proceed with the world's biggest leveraged buyout.
The high court overturned a Quebec Court of Appeal decision which had said the C$34.8 billion ($34.1 billion) plan, to be funded partly by taking on new debt, did not take adequate account of the interests of existing bondholders.
“The decision of the Court of Appeal is set aside,” the Supreme Court said in its judgment, without giving reasons.
It was a stunning victory for BCE, parent of Bell Canada, and analysts had said it would make the shares jump closer to the C$42.75 being offered by the Canadian-U.S. group of investors led by Ontario Teachers' Pension Plan.
However, banks involved in the deal are seeking better terms and that could still pose problems for the transaction, which has a June 30 deadline.
Before the surprise Quebec court decision on May 21, BCE stock had traded at C$37.12 a share. That was well below the offer price, because of uncertainty about completing the deal. The shares closed at C$34.60 on Friday just before the Supreme Court of Canada ruling.
The decision is a blow for Bell Canada bondholders, who had said the value of their securities had fallen by 18 percent because of ratings downgrades.
They had said directors for Bell and BCE had inappropriately tried only to maximize shareholder value. As a possible remedy they had suggested to the Supreme Court that BCE could be asked to redeem their bonds.
A ruling in their favor would have raised serious questions over the fate of future takeover bids, as it would have put boards in what BCE had argued would be irreconcilable conflict as they balance shareholder and bondholder interests.
It is still possible the Supreme Court might give clearer boundaries on future takeovers when it delivers a written opinion later but for now BCE and the buyers will be racing to wrap up the deal.
Ontario Teachers' buyout partners are U.S.-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.
(Reporting by Randall Palmer, David Ljunggren and Louise Egan; editing by Janet Guttsman)