Offer by investment group to purchase BCE
Goodmans LLP has represented the purchaser group, which includes Ontario Teachers Pension Plan, Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity, through all stages of the proposed $52 billion acquisition of Bell Canada, including:
- negotiations leading up to the initial announcement of the transaction in June 2007,
- securing Canadian regulatory approvals, including approvals from the CRTC and Minister of Industry,
- negotiation of the $34 billion financing to execute the transaction with a syndicate of banks led by Citigroup, Deutsche Bank, The Royal Bank of Scotland and The Toronto-Dominion Bank, and
- proceedings in the Superior Court of Quebec, Quebec Court of Appeal and Supreme Court of Canada.
The Goodmans transaction team is being led by Jonathan Lampe and includes Jon Feldman, Brian Wise, Kevin Wilson and Peter Hawkings (corporate); Jim Riley, Celia Rhea, Victor Liu, Elisabeth Cleghorn, Daniel Jeon and Vanessa Yeung (finance); Michael Koch, Monique McAlister, Clare Roughneen and Lauren Cappell (regulatory); Richard Annan (competition); Neil Harris, Carrie Smit, Mitch Sherman and Marisa Wyse (tax); Ben Zarnett, Jessica Kimmel, Suzy Kauffman and Karen Murdock (litigation); Tom Macdonald (environmental); Daniel Shapira (real estate); Joe Conforti and Joe Morrison (employment); Susan Rowland and Jana Steele (pensions); Amalia Trister (intellectual property).
As a result of BCE’s extensive holdings in all segments of the communications industry, the transaction required the prior approval of the CRTC and the Minister of Industry. The CRTC held a public hearing in February 2008 in which it examined the ownership and control structure and other elements of the transaction affecting ExpressVu and BCE’s other broadcasting holdings to ensure compliance with communications laws, including a Cabinet Direction concerning the non-eligibility of non-Canadians to hold broadcasting licences. This hearing was preceded by one of the most extensive documentary discovery processes ever undertaken by the CRTC as part of an ownership review.
In its first ownership review paralleling a public CRTC hearing, Industry Canada undertook its own review to ensure that Bell Mobility and BCE’s other wireless licencees could meet the telecommunications regulations limiting foreign participation in this sector.
After the public hearing and review of proposed documentation relating to the post-acquisition governance structure, both regulators concluded that the transaction would result in Canadians continuing to control BCE and granted their approvals for the transaction to proceed.
The transaction, and the plan of arrangement through which it is being implemented, were opposed by bondholders of BCE’s subsidiary, Bell Canada, resulting in a hearing before the Superior Court of Quebec, an appeal before the Quebec Court of Appeal, and ultimately an appeal to the Supreme Court of Canada. The litigation was unprecedented for a number of reasons, including its legal and financial significance and the speed at which it took place.
In March 2008, Justice Joël A. Silcoff of the Quebec Superior Court approved the plan of arrangement and ruled against the bondholders on every ground of their opposition. The Court concluded that:
- the fact the trading value of the bonds or their credit ratings may be adversely affected did not justify stopping a transaction which maximized value for shareholders and had been approved by over 97% of the voting shareholders,
- the bondholders’ contracts were being respected in the transaction and that the bondholders had not proven, on the evidence, that they had any reasonable expectation of protections beyond the terms of their contracts which did not contain any change of control provisions or guarantees of either trading values or credit rating, and
- the best interests of both Bell Canada and BCE, as well as those of their shareholders, would be served by the implementation of the plan of arrangement.
The bondholders appealed to the Quebec Court of Appeal, which heard the appeals on an expedited basis and issued a decision in late May that reversed Justice Silcoff’s approval of the plan of arrangement. The Court of Appeal held that the BCE board’s process once BCE was “in play” had been flawed and that the onus of showing the plan of arrangement was fair and reasonable had not been met by BCE. The Court of Appeal was of the view that the board:
- had focused on maximizing shareholder value, while respecting the contractual rights of bondholders,
- should have, but had not, considered the interests of bondholders beyond their contractual rights and should have, but had not, attempted to attenuate prejudice to the bondholders.
BCE and the Purchaser applied to the Supreme Court of Canada for leave to appeal from the Quebec Court of Appeal’s decision. The Supreme Court of Canada granted leave to appeal to BCE and the Purchaser in early June and processed the appeals on an expedited timetable with a hearing on June 17, 2008. On June 20, 2008 the Supreme Court granted the appeals of BCE and the Purchaser, setting aside the decision of the Court of Appeal and restoring the approval of the plan of arrangement, indicating that its reasons would follow at a later date.
In late-December 2008, the Supreme Court of Canada released the written reasons for its decision earlier in the year to approve the plan of arrangement by which the proposed acquisition of BCE Inc. (“BCE”) was to proceed. For reasons unrelated to the issues that the Court had considered at the hearing of this matter in June, 2008 the proposed acquisition had been terminated just prior to the release of the SCC’s reasons.
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