BCE: Analysts Disagree Over Final Closing Price

Despite a big lift on the back of the go-ahead from Canada’s top court, shares of BCE Inc. (BCE) are still well off their C$42.75 buyout price. Everybody seems to have an opinion about whether the deal will close as planned, or at all, and analysts are no exception.

David Lambert at Canaccord Adams thinks the chances of the BCE buyout being repriced are low. This is in part because the C$42.75 per share offer was determined by auction.

He told clients:

It is our view that approval of the BCE plan of arrangement, which allows a private equity group to purchase BCE for C$42.75, has changed the likelihood of the deal closing from negligible to very likely.

As a result, Mr. Lambert upgraded BCE shares to a “buy” and increased his price target to C$42.75 from C$28.75, which was based on the net asset value of the company’s business segments.

The deal now has to be ironed out by the banks and financing partners. And despite the fact that the Clear Channel Communications Inc. (CCU) deal demonstrated it is possible for the banks to reset the purchase price, Mr. Lambert said this is “not in the cards yet.”

UBS analyst Jeffrey Fan also upgraded his rating to a “buy” and raised his price target to C$39 from C$36.

While the lenders have said they are working to close the deal in accordance with the definitive agreement between BCE and the equity sponsors, he noted that similar statements were made in the Clear Channel transaction.

He told clients:

While the lenders do not expect the definitive agreement terms to change, there are still points in the financing documents to negotiate that could result in more favorable terms for the banks.

The analyst also added that this might lead to an adjusted buyout price.

Mr. Fan’s new price target is based on a 30% chance the deal closes at C$42.75, a 50% probability of C$40, and a 20% chance the deal collapses. The latter would result in a fundamental price target of C$31.