Is Telus Done Bidding For Bell Or Itself A Target For Onex?

 |  Includes: BCE, ONEXF, TU
by: FP Trading Desk

The market continues to wonder what Telus Corp.’s (NYSE:TU) true intentions were with Bell Canada Inc. (NYSE:BCE), whether or not it will re-enter the bidding process, and what else might play out in the Canadian telecom scene.

However, given that bids from all three private equity groups appear to be on the table and Bell probably wants to make a decision soon, Telus seems unlikely to get involved again, even if the deadline were extended, says UBS analyst Jeffrey Fan. He also noted that many investors felt as though Bell shareholders were accruing the lions share of the benefits.

Mr. Fan thinks shares of both companies could rise in the near term. For Telus, it is because the chances of it overpaying for Bell are reduced, while it remains the subject of leveraged buyout speculation. Bell could benefit since it pulled back on the Telus news and now that bids are in place.

So did Telus back out so it can assess the take-out price and then think about getting back in if it can beat it?

Even if that is the case, the key regulatory issue of it wanting to keep wireless assets would likely be a condition included in any offer.

And what about rumors that Onex Corp. (OTCPK:ONEXF), which dropped out of its bidding group at the last minute, could be interested in Telus?

“We continue to believe that a leveraged buyout of Telus is possible, but the likelihood is not significant enough to change our target price of $70 based on fundamental valuation,” Mr. Fan said. He has a $40 price target on Bell shares, based on a leveraged buyout valuation.