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June 26, 2007 7:31 pm

Telus pulls out of bid process for BCE

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Telus, the Canadian telecommunications group, Tuesday said it would not submit an offer for BCE, its larger rival, because of “inadequacies” in BCE’s bid process.

BCE had set a deadline of Tuesday morning for prospective bidders to submit proposals under a “strategic review process” that it aims to complete before the end of September.

But the exercise has been embroiled in controversy and at least two other participants in another bidding group have also pulled out. “The due diligence timeline hasn’t been long enough,” said Greg Macdonald, analyst at National Bank Financial.

Describing the withdrawals as “a tactic designed to get BCE to extend the deadline”, Mr Macdonald predicted that Telus and the other recalcitrants might yet return to the fray.

BCE shares dipped 3.5 per cent to C$39.30 shortly before noon in Toronto on Tuesday. Calls to BCE were not returned.

The company had earlier said that, besides Telus, it had signed non-disclosure and standstill agreements with three groups, which involve pension funds and US and Canadian private equity firms.

The three groups are led by the Canada Pension Plan Investment Board and Kohlberg Kravis Roberts; Cerberus Capital Management; and the Ontario Teachers Pension Plan in partnership with Providence Equity Partners.

Onex, a Canadian private equity group, and the Caisse de dépôt et placement du Québec have pulled out of the Canada Pension Plan group.

BCE began the strategic review in mid-April among growing restlessness among investors at its lacklustre stock market performance.

One investment bank has proposed that securities holders would be best served through a debt-financed recapitalisation.

Darren Entwhistle, Telus’s chief executive, had, before Tuesday, spoken out on the benefits of a deal with BCE.

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