Bell Canada’s hopes of overhauling itself through privatization have moved a giant step forward with the approval by the Canadian Radio-television and Telecommunications Commission of a take-over by a group led by the Ontario Teachers’ Pension Plan.
But it has come with some conditions aimed at what the commission hopes will cement Canadian control over the telcommunications giant.
In its ruling, released Thursday after the markets closed, CRTC chairmam Konrad von Finckenstein said noted the $35 billion deal includes “significant” foreign ownership through minority shareholdings of three American private-equity firms, Providence Equity Partners L.P., Madison Dearborn Capital Partners L.P. and Merrill Lynch Global Partners Inc.
The conditions being imposed by the commission “will ensure that control of BCE remains in Canadian hands once the transaction is completed,” the ruling said. The transaction will receive the commission’s approval if the conditions are met.
The Commission has ordered the investors to ensure the following changes in the governance structure are made:
–the number of directors on the board of directors is fixed at 13;
–six of those have to be nominated by Canadian investors. Non-Canadian investors can only designate five directors;
–the chairman of the board must be Canadian and cannot be the chief executive officer or a director nominated by a non-Canadian investor;
— a second Teachers’ representative must sit on the board’s executive committee; Because Bell also include broadcasting properties such as Bell ExpressVu, cable assets in the province of Quebec and a minority stake in CTVglobemedia Inc., the CRTC also made two more conditions:
— the board’s independent programming committee must consist of Canadians who are not affiliated with non-Canadian investors; and
— the threshold for veto rights must be raised to $110 million, approximately five per cent of the value of the broadcasting assets, which were set by the board at about $219 million.
In addition, the commission clarified that for purposes of determining effective control, it will only consider directors to be Canadian who are both Canadian by citizenship or residency and who are designated by Canadian shareholders.
The proposed arrangement between Teachers’ and one of its former executives, P. Morgan McCague, was another area of concern for the commission.
Under the proposal, he will hold 66.7 per cent of the class A voting shares and exercise his voting privileges according to Teachers’ directions. That would allow Teachers’ to exercise control over the majority of the company’s voting shares.
The CRTC said it would accept this arrangement only after being provided with a letter from the Financial Services Commission of Ontario stating that this structure does not contravene the province’s prohibition against pension funds directly or indirectly investing in more than 30 per cent of the voting shares of a company.
Plagued by plunging revenues from its historic wireline busines and facing fierce wireless competition which is demanding increasing infrastructure investments, Bell’s parent company BCE Inc. hopes that by being privatized it get away from the pressures of being a publicly-traded company, shed unprofitable products and become a leaner operation.
When final, Bell Canada president and chief operating officer George Cope will replace Michael Sabia as chief executive officer of BCE. Cope was president and CEO Officer of Telus Mobility before jumping to Bell two years ago. Before that he was president and CEO of Clearnet for 13 years.
In accordance with its tangible benefits policy, the CRTC revised the value of BCE’s applicable broadcasting assets from $109.6 million to $219.1 million, which increases the tangible benefits package to $21.9 million.
As part of this package, the Commission has directed that $10.5 million be placed in a fund whose annual revenues will support new media initiatives.
Among the things still in the way of the deal is a ruling by Quebec’s Court of Appeal of a ruling bya lower court against debentureholders trying to block the purchase.
A hearing is set for April 28.
