Timing Key If Telus Wants To Bid for Bell Canada

When Telus Corp. (TU) cited “inadequacies of BCE’s bid process” as the reason it chose not to make a takeover offer for its rival, part of the problem was how quickly BCE wanted to wrap up the auction. But with the Bell Canada Inc. (BCE) shareholder vote on its C$42.75 per share sale to a group led by the Ontario Teachers’ Pension Plan not expected until late October, time may now be an ally for Telus if it wants to consider jumping in the ring.

UBS Securities’ Jeffrey Fan puts the chances of Telus launching a hostile bid for Bell Canada at 25% or less given the uncertainty of how such a deal would be dealt with by the Competition Bureau [CB], and time is a key element in this process. Any bid without strong assurance (preferably in written form) from regulators would likely need to include a premium in the 5% to 10% range for Bell Canada shareholders, the analyst told clients in a note.

As a result, Mr. Fan considers a price of approximately C$46.75 per BCE share, or a premium of 9%, the point where the value of synergies from a Bell-Telus merger would effectively accrue to Bell Canada shareholders. As for Telus shareholders, he said they would not benefit unless the company was willing to use leverage and sacrifice its investment grade rating.

If Telus does seek something in writing from the CB, the process would likely begin with Telus filing an application detailing the transaction. Next, Bell Canada would have 20 days to complete its portion of the document. After this is received by the CB, it would then begin examining the proposed deal, which could take up to five months, Mr. Fan said.

Since he thinks the earliest Telus might have filed an application was in early July – when certain agreements with Bell Canada had expired and after it announced its deal with Teachers – the CB review would therefore be finished by the middle of November. But with the last possible date Bell Canada could hold its shareholders vote being October 29, Mr. Fan thinks it is unlikely Telus could get the assurances it would want in time.