By now it’s evident that the C$52-billion buyout of BCE Inc. (BCE) won’t be a cinch, at least as far as regulatory approval is concerned. And this means that some analysts are revisiting their stand on whether it's a done deal.

After two days of hearings before the Canadian Radio-television and Telecommunications Commission [CRTC] this week, the buyers – led by the Ontario Teachers Pension Plan – were asked to return on March 11 with answers to two tricky requests.

  • One is a CRTC demand that Teachers produce a letter from the Financial Services Commission of Ontario, the pensions regulator, confirming an arrangement to hand two-thirds voting control of BCE to a retired Teachers executive is kosher. Teachers is doing this to get around an archaic Ontario law that states no pension fund can own more than 30% voting control of a company (Teachers would be the largest equity holder, with 51%). On Tuesday, Teachers CEO Jim Leech told reporters that getting the commission to produce such a letter might not be so easy.

  • The CRTC and Teachers also remain at odds over what approval rights the pension fund would have over board decisions. Teachers seems to have otherwise won over the CRTC with a range of concessions to answer concerns that its bid was not Canadian enough, in accordance with federal law.

  • In a note Wednesday, UBS analyst Jeffrey Fan hedged on his earlier position that CRTC approval would be a slam-dunk, when he said that:

    Obtaining a statement from [FSCO] that indicates the deal complies with pension legislation is now a key step in receiving CRTC’s final approval.
    He noted a lack of precedent for the situation, adding: “the timeline to obtaining such an FSCO statement is less clear.” He believes the deal will close by mid-May.

    FP Trading Desk

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