How the Bell Canada Deal Got Done

The NYT's Ian Austen has a fascinating article today about, to quote his headline, "The Winding Road to a Giant Deal to Sell Bell Canada". It seems that the biggest buyout in history came as a result of an auction run idiosyncratically by the target company, in conditions of no little secrecy and mystery.

I'm sure that a long article will be written at some point about exactly what happened. But the two opposing views are already clear, and they're held not only by participants but also by neutral investors. While GlobeInvest Capital Management's Peter Breiger is quoted in the NYT as saying “Oh dear, oh dear, oh dear,” Guardian's Gavin Graham is quoted in the Globe and Mail as saying that "It's certainly a very generous offer," and that "it's difficult to see any other private equity bidder being able to match that with a straight face."

It seems that BCE controlled the bidding process much more tightly than is normally the case in takeover situations. Because Canada's takeover rules say that a Canadian bidder has to retain majority control, BCE was scared that all likely Canadian bidders would team up into a consortium, thereby making a competitive bid much more difficult. So the company "took it upon itself to tell would-be owners who they could, or could not, bring in as partners," according to the NYT.

The final bid certainly looks as though it's fully valued, and in general one shouldn't read too much into the fact that rival bidders dropped out at the last minute and are now complaining loudly to anybody who will listen. Such complaints are relatively common from alpha-male private-equity types who hate to lose anything. On the other hand, the enormous number of advisers involved in the process, as well as its extraordinary opacity, make it quite easy for the buck to be passed endlessly from one person to another if, as alleged, BCE managers did have an ulterior motive of keeping themselves in place and personally making as much money as possible.