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Last updated: April 10, 2007 11:24 pm

Ontario pension fund in move on BCE

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The Ontario Teachers Pension Plan has reached out to Providence Equity Partners, the US buy-out group, and several Canadian institutions about making an offer for BCE, parent company of Bell Canada, the country’s largest telecommunications operator.

People familiar with the matter said the talks were still at an early stage and OTPP, which is BCE’s largest shareholder with a 5.3 per cent stake, had not yet formally approached the company.

OTPP’s consideration of a bid for BCE will face numerous obstacles, including the size of the deal and potential opposition from the company. BCE has a market value of about C$28bn (US$24.3bn).

BCE has denied reports that it was in talks to go private, saying it “has no current intention to pursue such discussions”. It had no further comment on Tuesday.

BCE has extensive interests in fixed-line and wireless telephony. It is also Canada’s largest satellite TV operator and has a minority stake in CTV, the main privately-owned TV network, and The Globe and Mail newspaper.

The company has faced growing competition in recent years from, among others, cable-TV operators and internet telephony services. It lost close to 10 per cent of its residential phone subscribers last year.

But the company’s shares have shot up by almost one-fifth in the past two weeks amid speculation that a bid might be in the works.

Any change of control would require government approval, making it unlikely that a hostile bid would succeed. Furthermore, Canadian law limits foreign ownership of a telecoms company to 46.7 per cent.

Providence is the only US private equity group engaged in active discussions about an offer for BCE, people close to the situation said.

The OTPP said in a regulatory filing on Monday that it “is closely monitoring developments and is exploring its options”.

A spokeswoman added Tuesday: “We are looking at everything. It might be status quo, it might be something else. It is premature to say what we will be doing.”

Providence, which has a close relationship with the OTPP because the pension plan is a large investor in its funds, declined to comment.

Pension funds sometimes co-invest on deals along with private equity groups, and occasionally lead deals to buy companies directly, as the OTPP has done in the past.

But a bid for BCE would represent the largest effort of that nature by far.

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