OTTAWA – The Supreme Court of Canada on Tuesday reserved judgement on an appeal of the $53-million takeover of BCE Inc. by a consortium, including the Ontario Teachers’ Pension Plan.
BCE took the case to the Supreme Court after some investors in Bell Canada successfully convinced a Quebec Court of Appeal that the acquisition did not adequately consider the impact on Bell bondholders. The Quebec Court of Appeal rendered its decision in favour of the bondholders on May 21.
BCE subsidiary Bell Canada is guaranteeing the $34 billion needed to finance the deal, but the bondholders contend that Bell Canada will receive nothing in return.
A decision is expected before June 30, the date on which the buyers can walk away from the deal. The agreement has already received the approval of the CRTC and Bell shareholders. Other experts predict the decision will come much earlier.
During Tuesday’s hearing of the case, BCE lawyers argued the company’s directors did not infringe on any legal rights under the agreements with the bond holders and that they met the “fair and reasonable” test. BCE lawyer Guy Du Pont stated Bell met its duties to bondholders by ensuring its contractual obligations to pay interest and repay principal were fulfilled.
The legal team for the bond holders told the seven judges presiding over the hearing that Canadian law requires that any negative impact in a change of control be considered along with shareholder value.
The bondholders successfully earlier appealed a trial judge’s decision approving the buyout. The bondholders hold about $1.4 billion of the $5.2 billion of outstanding bonds that mature after 2010.
