BCE To Buy Manitoba Telecom Services In $3.9 Bln Deal

(RTTNews) - BCE Inc. (BCE, BCE.TO) said Monday that it will acquire all of the issued and outstanding common shares of Manitoba Telecom Services Inc. (MBT.TO) or MTS in a transaction valued at about $3.9 billion.

Bell noted that it plans to invest $1 billion in capital over 5 years after the transaction closes to expand its broadband networks and services throughout Manitoba.

The combined company's Manitoba operations will be known as Bell MTS. Winnipeg becomes Western Canada headquarters for Bell and, with the addition of MTS's 2,700 employees, Bell's Western team grows to 6,900 people.

The transaction will be completed through a plan of arrangement under which BCE will acquire all of the issued and outstanding common shares of MTS for $40 per share, which will be paid with a combination of BCE shares and cash.

MTS shareholders will be able to elect to receive $40 in cash or 0.6756 of a BCE common share for each MTS common share, subject to pro-ration such that the aggregate consideration will be paid 45% in cash and 55% in BCE common shares. The share consideration is based on BCE's 20-day volume weighted average price of $59.21.

This represents a 23.2% premium to the weighted-average closing share price on the TSX for the 20-day period ending April 29, 2016. The offer price represents a 40% premium to MTS's closing price of $28.59 on November 20, 2015, the business day prior to the announcement of the sale of its Allstream business communications division.

As part of the agreement, MTS will not declare any further dividends on its common shares after its upcoming second-quarter 2016 dividend, expected to be declared in May and paid in July.

BCE noted that it will fund the cash component of the transaction from available sources of liquidity and will issue approximately 28 million common shares for the equity portion of the transaction, which offers MTS shareholders access to BCE's dividend growth potential.

The Board of Directors of MTS has approved the transaction and recommends that MTS shareholders vote in favour of it.

The agreement between BCE and MTS provides for a non-solicitation covenant on the part of MTS and a right in favour of BCE to match any superior proposal. If BCE does not exercise its right to match, BCE would receive a termination fee of $120 million in the event the agreement is terminated as a result of a superior proposal.

Expected to close at the end of 2016 or early 2017, the transaction will be effected through a plan of arrangement and is subject to customary closing conditions, including court, shareholder, regulatory approvals and other conditions. A reverse break fee of $120 million would be payable by BCE to MTS if the transaction does not close in certain circumstances.

In a separate press release, BCE Inc. said that it will divest one-third of the postpaid wireless subscribers of Manitoba Telecom Services Inc. to TELUS Corp. following the completion of Bell's acquisition of MTS announced earlier today.

As part of the transaction, Bell will also assign one-third of MTS dealer locations in Manitoba to TELUS.

The Bell-TELUS transaction is subject to regulatory approvals and customary closing conditions. The Bell-MTS transaction is not conditional on completion of the Bell-TELUS transaction.