BCE Inc. to privatize regional telecom affiliate Bell Aliant

MONTREAL – BCE Inc. says it will buy the stake in affiliate Bell Aliant that it doesn’t already own and will privatize the regional telecom company.

BCE, which already controls Halifax-based Bell Aliant, is acquiring the interest of public minority shareholders in Bell Aliant for roughly $3.95 billion.

Bell Aliant’s public minority shareholders will receive cash and BCE common equity for a combined value of $31 per share.

The telecom giant already owns 44 per cent of its publicly traded subsidiary Bell Aliant, and is acquiring the remaining approximately 127.5 million common shares owned by Bell Aliant’s public minority shareholders.

BCE (TSX:BA) says Bell Aliant will continue to serve customers in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island from its Halifax headquarters. Bell Aliant also has regional telecom operations in rural Ontario and Quebec.

Bell Aliant provides television, Internet and phone services to its customers.

BCE says bringing Bell Aliant fully into BCE simplifies the company’s structure, eliminating costs and increases operational efficiency.

“Bell Aliant is a core part of BCE’s national communications operations alongside Bell Canada,” BCE president and CEO George Cope said in a statement on Wednesday.

“Privatizing Bell Aliant enhances our broadband investment strategy and capital markets objectives, while delivering great value to the public minority shareholders who have supported Bell Aliant’s success,” Cope said.

BCE said it plans a capital investment of $2.1 billion across Atlantic Canada over the next five years to continue the roll out broadband wireline and wireless for consumers and business users.

Bell Aliant’s broadband fibre-to-the-home network is expected to reach one million premises across the Bell Aliant territory by the end of the year, delivering high-speed Internet, digital TV experience and a range of business services.

BCE also said it will also continue to invest in broadband services for consumers and business customers in rural areas of Ontario and Quebec currently managed by Bell Aliant.

Canaccord Genuity analyst Dvai Ghose wasn’t surprised by BCE’s announcement.

” The deal has been speculated for a long time, does not require regulatory approvals, as BCE already controls Bell Aliant, and is at the high end of the fairness approval range, we assume a quick close,” Ghose wrote in a research note.

Ghose also said the deal should be financially advantageous for BCE and also should help it raise its dividend in 2015.

“But deal will also have a negative impact on BCE’s asset mix and growth and highlights BCE’s weakness,” he said.

“Consequently as with the CTV and Astral acquisitions, we envisage near-to-medium term accretion but longer term declines. The deal therefore suggests to us that BCE has to continue to acquire to grow dividends, unlike its nearest peer TELUS which has targeted at least 10 per cent annual DPS (dividend) growth to 2016.”