Thursday, July 19, 2007

Caught in the eye of the BCE storm - JACQUIE MCNISH

It was big, nasty and messy, and Ed Waitzer was smack in the middle of it.

When the Stikeman Elliott LLP deal maker was airlifted into the BCE Inc. auction in April to advise a special committee of directors, he braced himself for a public outcry over the loss of one of Canada's largest companies. What he wasn't prepared for was the furious insults, complaints and deal punches hurled at the board, its executives and advisers during what became one of the messiest auctions witnessed in Canada.

"There were a lot of noisy grievances from bidders who were trying to tilt the auction in their direction or who genuinely felt that it was being tilted away from them," Mr. Waitzer said.

As the bidding lurched from one suitor to another and buyers stormed away complaining bitterly about the auction process, Mr. Waitzer said his challenge was to keep the committee of directors focused.
"There was a lot of noise and some of it was nasty and personal. I had to keep everyone focused on the law and the process so that we were doing what was best for shareholders," he said.

The noise, at times, was deafening. The Ontario Teachers' Pension Plan set the tone from the start by going hostile with a public securities filing that signalled a possible unsolicited bid. Then BCE's CEO Michael Sabia and chairman Richard Currie infuriated potential suitors by shepherding friendly buyers into a monster bidding syndicate headed by the Canada Pension Plan Investment Board and Kohlberg Kravis Roberts & Co.

While suitors yelped that the deck had been stacked against them, mini-dramas erupted off stage in each camp. First, the CPP syndicate saw some of its Canadian backers defect, then New York's Cerberus Capital lined up improbable Canadian partners who were long on ambition but short on cash. At the 11th hour, BCE's archrival Telus Corp. arrived at the deal table, fought furiously to gain access to the data room and then retreated in a huff complaining publicly about "inadequacies" in the auction process.

Over in BCE's camp, things weren't much calmer. As the company's special committee of directors jostled with bidders and, at times, its senior executives over how to steer the auction, a cast of legal advisers twirled across the stage. Key BCE advisers Bill Braithwaite, at Stikemans, and Bill Ainley, at Davies Ward Phillips & Vineberg LLP, moved into the wings after CPP emerged with its gorilla-sized buying group. Taking the lead after that were grizzled New York M&A veteran James Morphy at Sullivan Cromwell LLP and Mr. Waitzer.

Joining the BCE legal chorus was ferocious litigator Alan Lenczner, who kept a trained eye on cranky bondholders threatening legal action. Rounding out the large legal team were competition experts Neil Finkelstein and Brian Facey at Blake Cassels & Graydon LLP, who arrived presumably to help shape a regulatory-proof merger strategy with Telus.

With so many advisers and warring suitors, it's a wonder BCE's board ever made a decision.

Mr. Waitzer's strategy was to keep it simple by advising the committee of directors to keep focused on the one thing that mattered most to shareholders: price. All complaints, threats and criticisms would evaporate, he told directors, if they were able to deliver a substantial premium to BCE shareholders that had endured a listless stock price for years.

And while BCE's $34.8-billion deal with Ontario Teachers amounted to a 42-per-cent premium over its stock price prior to the auction, some critics argue the price might have been even higher had the company been able to keep its rival Telus at the table.

Mr. Waitzer disagrees. He said Telus is still free to come back with an unsolicited offer. Even if it doesn't, he said shareholders shouldn't complain about the Teachers offer, which exceeds even the most optimistic expectations when the auction started in April.

"At the end of the day it is pretty hard to screw up an auction because price wins," he said.

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