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Last updated: May 24, 2007 12:10 am

Cerberus joins race for Canada’s BCE

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A group led by Cerberus Capital Management, the New York private equity group, has joined the race for a buy-out of BCE, Canada’s biggest telecommunications operator.

BCE confirmed on Wednesday that the Cerberus group, which also includes Canadian investors, had signed non-disclosure and standstill agreements on a non-exclusive basis.

At least two other potential buy-out groups have expressed interest. One includes the Canada Pension Plan Investment Board in partnership with the US private equity firm, Kohlberg Kravis Roberts, and the Caisse de dépôt et placement du Québec.

The Ontario Teachers Pension Plan in partnership with Providence Equity Partners of Rhode Island has also been eyeing the Montreal-based company. The teachers’ pension fund is BCE’s biggest single shareholder with a 5.3 per cent stake.

BCE has said that it expects to complete its review of the bids and other “strategic alternatives” during the third quarter. It cautioned on Wednesday that the review might not result in “any specific action being taken”.

Under Canadian ownership rules, foreign shareholders are restricted to a 47 per cent stake in telecoms operators.

BCE officials were not immediately available to provide further details on the Cerberus consortium. Local reports said earlier that Cerberus was courting two western Canadian media groups, CanWest Global Communications and Shaw Communications, as partners.

CanWest, controlled by the Asper family, owns, among others, the National Post newspaper and the Global TV network. It bought the National Post from Conrad Black. Shaw, based in Edmonton, is one of the country’s biggest cable operators.

Both companies are much smaller than BCE, but could benefit from its diverse portfolio of businesses which, besides landline and wireless telephony, Canada’s biggest satellite-TV operator and a minority stake in Bell Globemedia, which controls CTV, the country’s biggest private-sector TV network, and The Globe and Mail newspaper.

BCE has been pressured to consider the buy-out approaches in the wake of growing restiveness at its lacklustre stock-market performance in recent years. Its attractions include strong and stable cash flows from its telephone operations, and its diverse portfolio of businesses.

Potential suitors have suggested that taking the company private would enable it to make long-term investments without the pressure of quarterly earnings expectations.

BCE’s stock closed up C50 cents, or 1.3 per cent, at C$39.26 on Wednesday. Its shares have soared by 22.5 per cent since March 29, when rumours of a buy-out first surfaced.

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