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Canada’s Supreme Court approves blockbuster BCE deal

The justices unanimously struck down a Court of Appeals decision that favoured bondholders and would have killed the $52 billion buyout.

The Supreme Court of Canada has unanimously reversed a decision from the Québec Court of Appeal that would have blocked the $52 billion (€33 billion) buyout of BCE by a private equity consortium including Teachers’ Private Capital, Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.

“The decision of the Court of Appeal is set aside and the trial judge’s approval of the plan of arrangement is affirmed,” the Supreme Court said.

This is not the first time the fate of the largest proposed leveraged buyout to date has been in the hands of the Canadian courts.

In May, five judges unanimously overturned the prior ruling of Québec’s Superior Court in a lawsuit brought by some of the telecom company’s debenture holders. The plaintiffs were upset, among other things, by the devaluation of BCE bonds, which they attributed to the pending LBO, and felt the take-private should be structured as a reorganisation, thus giving them voting rights.

“The judgment overturning the Québec Superior Court decision rewrites Canadian law relating to the duty of Canadian boards of directors to maximize value for shareholders in the context of a change of control transaction, as well as to the entitlements of bondholders in those circumstances,” Martine Turcotte, BCE’s chief legal officer, said in a statement at the time. “Both the transaction and the issues of law involved are of public importance in Canada. We believe the Supreme Court of Canada should reverse this decision, and allow the transaction to proceed.”

Financing concerns that have plagued other mega-buyouts agreed before the dislocation of global credits markets may still impede the deal’s closing. Lenders Citi, Deutsche Bank, Royal Bank of Scotland and Toronto-Dominion Bank are reportedly looking to renegotiate the deal’s financing with higher interest rates, tighter loan restrictions and stronger protections for the banks.

On news of today’s court decision, the banks said in a statement that they expect the transaction to close “in accordance with the definitive agreement between BCE and the sponsors. We continue to negotiate the financing documents in good faith with the sponsors and stand behind our original commitment to the transaction.”