UBS: A CanWest Communications Investment in BCE Doesn't Make Sense

CanWest Global Communications Corp.’s (CWG) C$9 per unit offer to privatize the CanWest MediaWorks Income Fund is another example of moves by the company that could make it better suited for a private investor, rather than continuing to undergo the scrutiny of equity markets, according to UBS analyst Eric Mencke.

While he doesn’t think CanWest is likely to go private, the privatization of newspapers through the income trust deal, its acquisition of Alliance Atlantis with Goldman Sachs and speculation that it could invest in BCE Inc. (BCE), “could point to CanWest being an entity with interests in a number of vehicles with a reasonable amount of leverage,” he said in a note to clients.

Does an investment in BCE make sense? Mr. Menke says no, because it would add both risk and ambiguity. But with an estimated C$200-million available for such a deal, he thinks the investment would probably not be material.

His “buy” rating at C$13.50 price target for CanWest Global shares remained unchanged.