Belus (Telus and BCE) - A Possible Reality?

The expected collapse of BCE Inc.'s (BCE) C$52-billion buyout has some analysts speculating that Telus Corp. (TU) may re-enter the fray.

Scotia Capital analyst John Henderson said in a research note:

This development reopens the door to a potential merger with Telus. We believe Telus remains very interested in entering merger discussions.

Mr. Henderson believes BCE and Telus are strongly motivated to enter into merger discussions, suggesting that merger synergies would produce a 32% value creation for both companies.

Telus first confirmed that it was in talks to acquire BCE back on June 21, 2007, two months after BCE said it was reviewing its strategic options. Less than a week later, Telus announced that it was not submitting an offer, citing inadequacies with BCE’s bid process.

The analyst even provided ten reasons regulators would support a merger – a key point that has produced plenty of doubt both in the past and today. For example, a net present value estimate of the synergies (minus integration costs) of C$10-billion, produces a lower cost structure that “better enables Belus to compete in an increasingly competitive market.”

Other reasons the analyst cited include, competition is fierce and getting worse, a wireless merger doesn’t increase pricing power, and merger synergies can help fund growing pension obligations. He also said a merger would create the kind of “Canadian Champion” Industry Canada has been supportive of nurturing.

Canaccord Adams analyst David Lambert issued a report that said BCE’s likely fallback scenario could be to combine some of its operations with Telus, particularly Bell Mobility and Telus Mobility. While boosting Telus’ strategic value, this would generate C$1-billion in potential annual synergies, he said.

The analyst estimates the merger could create C$9.5-billion of value for both BCE and Telus shareholders from the mobility segment alone.

Mr. Lambert added:

Assuming Telus shareholders could participate in 50% of this value creation, it could have a C$13.95 share impact on Telus shares.

Comments

[myopinioncounts]

I suspect BCE is strong enough to keep its value here b/w $20 and $16 however I still do not have a handle on level of debt and pension liabilities - this is what causes longer term trouble going forward however there are enough noises and speculation of telus making a go now that it is worth the hold.... I notice reuters says something different about canacord position, maybe seek alpha reading too much into matters:

BCE)+with+a+Hold,+Prefers+TELUS+(TU)/4199078.html'>www.streetinsider.com/...

Regardless, Look into Metanor Resources MTO on TSX-V exchange for a special buying situation based on commercial gold production with high margins, growing reserves and most importantly trading at a fraction of infrastructure with NO DEBT www.miningmarketwatch.... good insight to bring you up to speed.

2008 Nov 28 02:37 PM