TORONTO – Catalyst Asset Management continues to raise objections over the proposed takeover of BCE Inc. by the Ontario Teachers’ Pension Plan and its investment partners. Catalyst is the investment banking and advisory firm that proposed an alternative bid last June that would have recapitalized BCE without altering its Canadian ownership.
Catalyst said in a press release on Monday it is concerned that an ongoing post-closing condition imposed by the CRTC on the proposed privatization of BCE may not be met, and Catalyst intends to pursue the matter if and when the privatization is completed.
In its decision CRTC 2008-69 on March 27, the CRTC gave its conditional approval to the broadcast assets portion of the $52-billion takeover of BCE. Already approved by BCE shareholders, the deal also received approval from Industry Canada less than two weeks ago.
Under the structure for the proposed transaction, control of BCE will be transferred to BCE Holdco, and Morcague Holdings Corp. will hold 66.7% of the Class A shares of BCE Holdco, the only class of BCE Holdco shares to which explicit votes are attached. The voting of those shares is subject to an agreement between Morcague and the Ontario Teachers’ Pension Plan (Teachers’) that grants Teachers’ full voting and transfer rights over the Class A shares registered in the name of Morcague.
According to Catalyst, this voting arrangement appears to contravene Section 11(1) of Schedule III of the Pension Investment Regulations, which states: “…the administrator of a plan shall not, directly or indirectly, invest the moneys of the plan in the securities of a corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation.”
In response to the CRTC’s own concerns prior to its March 27 decision, Teachers’ provided a letter from its pension regulator, the Financial Services Commission of Ontario (FSCO). In that letter, FSCO concluded that the transaction complies with pension investment regulations, given the fact that Morcague is acquiring the Class A shares with its own money and Teachers’ did not “invest plan moneys” in the voting shares, in FSCO’s view.
In its press release, Catalyst quoted CRTC Chair Konrad von Finckenstein as having said on March 11 at the CRTC public hearing: “I must say I am astounded. The interpretation that FSCO puts on these things is not the one that either I as a lawyer or former judge would put on that legislation and regulation….But, be that as it may, it is their position and we are here to judge whether you are in control or not. We just wanted to make sure that what you are doing is in accordance with Ontario pension law, and clearly [FSCO’s deputy superintendent of pensions] feels that it is.”
However, the CRTC stipulated in its March 27 decision that if the FSCO’s position “is successfully challenged in a court of competent jurisdiction, the conditional approval set out in this decision is automatically withdrawn and the applicant shall bring a new application to the Commission within 30 days…”
For its part, Catalyst said a legal challenge of the position expressed in the FSCO letter is premature until such time as the proposed transaction is actually completed. Once the proposed transaction closes, Catalyst intends to pursue the matter further, the company said.
