Shares drop as BCE buyout in limbo

Quebec Court of Appeal rules on takeover

TORONTO -- A $34.8 billion ($35.3 million) buyout of Canadian phone giant BCE by a domestic pension fund and its U.S. equity partners has been thrown into doubt after the Quebec Court of Appeal ruled the takeover is unfair to bondholders.

Shares in BCE on Thursday fell 13% to CAN$32.25 ($32.50) during afternoon trading on the Toronto Stock Exchange, well down from the CAN$42.75-a-share offer from the Ontario Teachers' Pension Plan and U.S. partners Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch.

The BCE takeover deal, which represents Canada's largest-ever leveraged buyout, could be salvaged if the phone giant reaches a settlement with bondholders, analysts said.

The bondholders oppose the bid to take BCE private as that would load the phone giant with debt, which in turn would reduce the security and value of the bonds.

The takeover deal is culturally sensitive because BCE's broadcast assets include a stake in CTV, the national TV network, and ownership of Bell ExpressVu, the direct-broadcast-satellite TV service.