Now that Bell Canada Inc. (NYSE:BCE) has chosen its preferred bidder in a group led by the Ontario Teachers’ Pension Plan, much of the attention turns to its western rival Telus Corp. (NYSE:TU). While the market weighs the odds of Telus re-entering the running for Bell, it too could be in the sights of private equity buyers.
This is precisely what Telus boss Darren Entwistle said he was trying to avoid with a potential Bell-Telus merger. It was also likely behind Telus’s plans to convert to an income trust, which was prevented by tax rule changes by the federal government. Canadian pension funds, a strategic buyer or a combination of players make Telus a vulnerable target once again, Canaccord Adams analyst David Lambert said in a note to clients.
He initiated coverage of Telus with a “buy” rating and C$74 price target, which reflects the potential for a bid from a financial buyer. However, he thinks there is a small probability that a strategic buyer like Quebecor Media launches a bid for Telus. Quebecor Media is 45%-owned by the Caisse de dépôt et placement du Québec and 55%-owned by Quebecor Inc.