Caisse de depot seeks to cash in through heavy buy of BCE shares
MONTREAL - Canada's largest pension fund manager, the Caisse de depot et placement du Quebec, may be looking to cash in on the privatization of BCE Inc. (TSX:BCE) after it nearly doubled its stake in Canada's largest telecom company in the last few months.
The Caisse disclosed in a quarterly filing Tuesday with the U.S. Securities and Exchange Commission that it purchased 2.4 million shares of BCE in the three months ending March 31. That raises its stake to 5.26 million shares, valued at US$178.4 million, or $33.92 per share.
It has been building its investment in BCE for months, buying more than 2.2 million shares last summer.
The pension fund manager stands to receive $224.9 million if a private equity consortium led by the Ontario Teachers Pension Plan completes its takeout at $42.75 per share.
Telecom analyst Iain Grant of the SeaBoard Group said the Caisse is betting that the deal will close as planned.
"I would think they are merely placing a bet on the eventual outcome, which is that the Teachers will be paying out at a higher level than the market suggests," he said Tuesday.
Another industry observer said the Caisse may be positioning itself again to secure a stake if the consortium partners want to farm out some of their holdings.
The Caisse withdrew last year from a partnership involving private equity giant Kohlberg Kravis Roberts and the Canada Pension Plan Investment Board that bid for BCE.
"Obviously they're doing it because they think they'll make money at some point, whether they think it will be right now (or later)," said the analyst who didn't want to be identified.
While that objective is plausible, Grant said it's not likely.
The Caisse wasn't the only group looking to make a quick buck on BCE's takeover. The company's shares inched to their highest level in months Tuesday after it announced its prospective buyers filed "all required materials" with CRTC.
Heavy trading on the Toronto Stock Exchange sent BCE shares up to $39.10, the highest level since January. The stock gained $1 or 2.62 per cent. On Monday the stock gained two per cent.
Details of the CRTC filing weren't immediately available. But the regulator imposed several conditions to ensure Canadian control by boosting the Teachers role.
Its partners include U.S. partners Providence Equity Partners Inc., Madison Dearborn Partners, LLC, and Merrill Lynch Global Private Equity.
"We believe that the filing addresses all the conditions set out in the CRTC's March 27 decision," BCE spokesman Bill Fox said.
The CRTC is expected to respond in a couple of weeks on whether the filing meets the conditions set to transfer of BCE's broadcasting licenses to the investor group.
The CRTC filing removed some investor concerns about the deal that accelerated after BCE sought an extension to meet the regulator's conditions.
Analysts believe BCE shares have risen of late primarily on reports of improve credit market conditions and a possible settlement in the US$20 billion leveraged buyout of Clear Channel in the U.S. involving many of the same banks as BCE.
Business channel CNBC said a deal had been reached providing a leveraged buyout at $36 per share, down from the original $39.20.
"Generally the market is responding to what it sees as the positives in the fact that the banks aren't technically walking away," said Troy Crandall of MacDougall, MacDougall & MacTier.
"They are willing to renegotiate to a certain extent just to get the deal done."
BCE said it expects the transaction to close before the end of the second quarter.
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