BCE in talks with KKR, Canadian pensions

Canada’s largest communications company, BCE, has announced it is in buyout discussions about a potential $28 billion privatisation.

BCE is reviewing “strategic alternatives” and has begun “early stage” discussions with an investment group comprised of three of Canada’s largest pension funds and private equity firm Kohlberg Kravis Roberts.

Buyout talks for the Montreal-based telecom giant, which has a market cap of $27.7 billion (€20.5 billion), are being led by the Canada Pension Plan Investment Board, the Caisse de dépôt et placement du Québec, and Canada’s Public Sector Pension Investment Board, the consortium said in a statement.

KKR will be a minority partner, likely due to the fact that Canadian laws governing telecommunications and broadcasting companies would prohibit foreign investors from owning more than approximately 46 percent of BCE.

On Saturday, Canada’s Financial Post reported that the Ontario Teachers’ Pension Plan had put together a Canadian-led consortium for BCE. The deal outlined, citing sources familiar with the situation, had Teachers’ supplying 33 percent of the transaction’s equity, with another 25 percent coming from Rhode Island-based Providence Equity Partners. The balance would have been made up by other Canadian pension funds, the newspaper said.

Statements from both BCE and the investors with whom it has begun talks, however, do not mention Teachers’ nor Providence Equity.

A spokesperson for the pension fund, which owns 5 percent of BCE, noted that Teachers’ is encouraged that BCE’s board has started the process of reviewing alternatives and that Teachers’ may participate in the process.

“As the largest shareholder, we expect to be a participant”, Jim Leech, a senior vice president at Teachers’, reportedly said Tuesday.

Canada’s Globe and Mail reported 29 March that BCE was mulling a buyout bid and listed KKR as an interested party. The same day, BCE issued a statement denying rumours of ongoing buyout discussions and noting it had “no current intention to pursue such discussions”.