GATINEAU – The CRTC flexed its regulatory muscles this morning, pressuring the soon-to-be-owners of Bell Canada to more clearly spell out who will control the corporation.
As readers are no doubt aware, a consortium led by the Teachers’ Private Capital, the private investment arm of the Ontario Teachers’ Pension Plan, along with Providence Equity Partners and Madison Dearborn Partners, bid $51 billion (debt included) to take the country’s largest telco private.
Given that the new Bell will continue to own a couple of assets that fall under strict regulatory control (namely its TV distribution unit headed by Bell ExpressVu and the 15% of CTVglobemedia owned by Bell being added to the 40% CTVgm stake owned by Teachers), the Commission panel – comprised of the heavy-hitters: chairman Konrad von Finckenstein; vice-chair telecom Len Katz; and vice-chair broadcasting Michel Arpin – has to know that control will rest in Canada.
“We think this is a far from easy transaction to understand,” said von Finckenstein this morning.
Under Ontario pension law, Teachers (or any other pension plan) can’t own more than 30% of the voting shares of a corporation, so a man named Morgan McCague (a former Teachers’ executive), will own 66.6% of the voting shares – but will vote those shares according to the wishes of the controlling equity holder. Teachers is putting up 51% of the equity in the deal.
Von Finckenstein said he didn’t want to approve a transaction that ran afoul of pension laws and wants to see documentation of the agreement with McCague as well as some sort of approval letter from pension officials telling him the deal is okay under Ontario pension law, neither of which the applicants had this morning.
The chair then moved on to the board structure and the makeup of the executive committee. The 13-member board as proposed will be comprised of five Teachers appointees, five from Providence and Madison Dearborn, CEO George Cope and two independent directors chosen collectively by Teachers, Providence and MD.
While Teachers president and CEO Jim Leech promised the independent directors and majority of the board will be Canadian, as required, von Finckenstein sounded none too impressed, saying that the directors, Canadian or not, would choose to vote according to the wishes of those who appointed them. “That leads to paper compliance and doesn’t necessarily lead to control in fact,” said the chair. “We’re talking here about control in fact.
“You can choose to hear me or not hear me, but I’ve made my point.”
When it came to the executive committee, while three of the four members must be Canadian, it is to be comprised of the CEO, one Teachers appointee and one each from Providence and MD. “This is one notch down than where you are on the board,” noted von Finckenstein.
“This committee has very very very limited powers,” said Leech, who added the committee will meet to gather and exchange information but has no decision making power.
“I think you might want to reflect on this and whether it truly meets the test,” said von Finckenstein, referencing how control of Canadian broadcast companies or BDUs must rest in Canada. “It doesn’t look like Teachers is running the executive committee.”
Then later on, after the interveners appeared Monday afternoon, von Finckenstein wished the folks from Bell/Teachers et al a good evening with these words: “We have grave concerns over some aspects of the proposed transaction.”
Watch Cartt.ca to see if those concerns are addressed when they face the Commission again.
