Status Report: BCE - Teachers Private Capital Deal

Jan.23.08 | About: Toronto-Dominion Bank (TD)

The BCE, Inc. (NYSE:BCE) - Teachers Private Capital deal has very obviously deteriorated to the point where it must now be considered possible, if not probable, that the parties will decide to terminate the transaction.

If not for the fact that so many parties are involved in the buyout consortium, it could reasonably be projected that the various issues could be navigated successfully. Unfortunately, this group scenario creates too much uncertainty even in deals with single and/or minor issues. This deal now faces additional regulatory matters with the CRTC and increasing concerns over bank financing commitment on top of the ongoing litigation in front of the Quebec Superior Court.

Although it is certainly unfair that this deal is being compared so closely to the ADS-Blackstone (NYSE:BX) deal in general terms, the fact is that this is indeed occurring regardless of the absolute lack of similarities. This rather odd development alone could easily motivate one or more of the consortium to force renegotiations of the current agreement. The potential financing, regulatory, and legal issues equate to a situation where there appears to be little reason to expect the parties to remain committed to the deal barring some drastic positive developments in the short term. This just does not seem likely.

Thus, the current expectation is, in a best case scenario, for the Teacher's group to suggest negotiating revised terms which severely reduce to the offer price for BCE. However, it seems just a likely that the buyout consortium will simply choose to walk away from this deal given the circumstances that have developed.

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