BCE Up After Quebec Court Approves Takeover

With the Quebec Superior Court’s approval of BCE Inc.’s (BCE) Plan of Arrangement and its dismissal of all bondholder claims, everyone seems to think the telecom giant’s shares will rally now that this significant risk to the $52-billion buyout has been removed. The question is by how much?

BCE closed at C$35.80 on Friday, roughly 16% below the C$42.75 per share offer from a group led by the Ontario Teachers' Pension Plan that was accepted in June.

RBC Capital Markets analyst Jonathan Allen expects BCE shares will rally to C$38 or C$39, and thinks it could trade closer to C$40 if the bondholders do not pursue an appeal. They have ten days (March 17) to do so, he told clients in a note, adding that the transaction may not be able to close until an appeal, which could take 60 days, is resolved.

Desjardins Securities analyst Joseph MacKay expects the stock to rally to C$37 or C$38, with the market’s focus shifting toward tight credit markets and CRTC/Industry Canada approvals. CRTC hearings resume on March 11 and the analyst expects the deal to close in by the middle or end of April.

Mr. MacKay also noted that on April 14, BCE will pay a dividend to shareholders of record on March 14. In terms of the chances of an appeal, he suggested that the bondholders may not pursue an appeal given the strong wording from the judge’s decision.

Jeffrey Fan at UBS agrees that an appeal is unlikely due to the downside of further legal expenses. He also sees the deal closing by the middle of the second quarter.

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Yesterday morning the shares were up more than 5% after a Quebec Superior Court Justice approved the C$52-billion dollar takeover deal late Friday, to the chagrin of certain bondholders opposing the deal.

In his decision, Judge Joel Silcoff wrote the proposed buyout of BCE is "fair and reasonable."