BCE taking Bell Aliant private in $4B deal

Move ‘enhances out broadband investment strateg y,’ says CEO

With the continued threat of more competition in Canada’s wireless sector, BCE Inc. announced Wednesday it will pay almost $4 billion for the shares in Bell Aliant that it doesn’t already own in a move aimed at bolstering cash flow and streamlining its corporate structure.

Bell Aliant, currently 44 per cent owned by BCE, provides telecommunications services across Atlantic Canada and industry observers have long speculated that the two organizations would eventually get folded together as a way to take advantage of synergies and cost savings.

Under the deal, Canada’s largest telecom has agreed to pay $3.95 billion, or $31 per share in cash and stock, for the 127.5 million Bell Aliant shares held by other investors.

Bell Aliant shares soared almost 12 per cent Wednesday to close above the privatization price at $31.53. BCE rose 1.65 per cent to $49.82.

“Privatizing Bell A liant enhances our broadband investment strategy and capital markets objectives while delivering great value to the public minority shareholders who have supported Bell Aliant’s success,” BCE chief executive George Cope said.

The transaction comes amid a push from the federal government to boost competition in the wireless sector by creating the conditions for a fourth player to compete with BCE, Rogers Communications Inc. and Telus Corp., a move some observers worry could put pressure on industry revenue.

A key benefit is that the deal will boost BCE’s free cash flow and some analysts said by doing it now, BCE is bolstering its defences for what may be coming.

“In terms of wireless competition, if you have a fourth provider that could get up and running next year, this deal makes even more sense,” said Maher Yaghi, an analyst at Desjardins Securities.

Getting it done sooner rather than later “allows (BCE) to have access to cash flows faster, and you don’t have to sacrifice dividend growth” if margins do get squeezed down the road.

Since it already controls Bell Aliant, BCE said it does not need approval from the Canadian Radio-television and Telecommunications Commission or Industry Canada.

Formed in 1999 through the merger of local telcos, Bell Aliant has operations across the Maritimes as well as parts of Ontario and Quebec. BCE said it plans to spend $2.1 billion in Atlantic Canada over the next five years as it rolls out new technology.