In-play telecom probed for release denying talks

OTTAWA — While a bidding war goes on for BCE Inc., InvestmentNews learned last Tuesday that the Montreal-based telecom giant is under investigation by Market Regulation Services Inc. for a misleading, possibly fraudulent, press release. “All that I can tell you is, yes, we are investigating BCE about the release,” said Maureen Jensen, vice president of market regulation, Eastern region, for the Toronto-based independent regulation services provider for Canadian equity marketplaces, which is known as RS. “It appears it had incomplete information, and we are examining trading in the stock.” The BCE release, dated March 29, said that “at the request of the TSX Market Regulation Services, BCE today issued a statement to confirm the fact that there are no ongoing discussions being held with any private-equity investor with respect to any privatization of the company or any similar transaction. BCE further stated the company has no current intention to pursue such discussions … As per the company policy, BCE will not comment further on rumors and speculation.” Less than three weeks later, on April 17, BCE announced that “ … it has entered into discussions with a group of leading Canadian pension funds to explore the possibility of taking the publicly traded company private. This group will be led by the [Toronto-based] Canada Pension Plan Investment Board, the [Montreal-based] Caisse de dépôt et placement du Québec and the [Ottawa-based] Public Sector Pension Investment Board (PSP Investments), who have signed a non-disclosure and standstill agreement with BCE on a non-exclusive basis. Kohlberg Kravis Roberts & Co., a leading global private-equity firm, has also signed the agreement and will join the Canadian-led consortium as a minority partner.” But many media outlets have reported since then that New York-based KKR and the CPPIB conducted secret discussions with BCE for months about a possible takeover deal. BCE, the parent of Bell Canada, now is worth about $28 billion (U.S.). At that price, the deal would rank as the sixth-largest private-equity buyout in the world. BCE is listed on the Toronto Stock Exchange, whose Timely Disclosure Guidelines require companies to disclose material information. Ms. Jensen said that after the investigation, RS would contact the exchange and the Ontario Securities Commission in Toronto to press charges, if warranted. “Nothing I’m aware of,” said Steve Kee, director of media and marketing for TSX Group Inc., which operates the exchange, when asked by e-mail whether there would be any follow-up from the exchange on BCE’s denial. “Everything we have to say is in the release,” said Pierre Leclerc, BCE’s director of media relations. Regulatory hurdles The rules market regulators such as RS impose are not the only regulatory hurdles BCE suitors face. Foreign-led takeovers of telecommunications carriers would have to play by existing rules that impose a 46.7% limit on foreign ownership. That means finding a Canadian partner. But Vancouver, British Columbia- based Telus Corp. has rebuffed invitations from groups pursuing rival BCE Inc., because of concerns about regulatory red tape. “In the high stakes world of mergers and acquisitions, the consequences of getting things wrong on the regulatory front are increasing,” Brian Facey, a lawyer with Toronto-based Blake Cassels & Graydon LLP, wrote in the January issue of the firm’s Blakes Bulletin on Business Law. “Where a transaction raises significant issues for the Competition Bureau, its review can add millions of dollars to the cost of a deal, cause delays of up to five months and even result in the transaction being blocked in whole or in part. “What’s more, the bureau can challenge a transaction for up to three years after it has closed and ultimately require its dissolution. “The purpose of the substantive review is to determine the likelihood of a merger substantially preventing or lessening competition in one or more relevant markets,” Mr. Facey wrote. The Competition Bureau, based in Gatineau, Quebec, is an independent Canadian law enforcement agency that investigates complaints and monitors businesses for fair practices.