UBS: CRTC Approval of BCE Deal Not Necessarily a 'Done Deal'

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.