BCE sues for $1.2 billion break-up fee

Bell Canada Enterprises has filed a lawsuit against the parties that had sought to acquire the company, in an attempt to recovery the $1.2 billion break-up fee that was written into the deal. The break-up fee actually was added to the purchase agreement this year, well after the original agreement was forged in July 2007. It is believed to be the largest merger break-up fee ever sought, because the BCE buyout would have been the largest leveraged buyout in history, worth at least $35 billion.

The acquisition fell apart last week as it was set to close on Dec. 11, because auditor KPMG said the debt loaded into the deal did not allow it to support the deal with a positive solvency opinion. The solvency opinion had been requested by BCE itself to mollify investors who were unhappy about the acquisition, so in a way, BCE's own actions triggered a series of events that led to the deal's undoing. However, BCE claims that the buyers were well aware of all the risks and the tough market conditions, and that they walked away from the deal a day before the scheduled closing date, which BCE argues should trigger the break-up pay-out. BCE also reminded everyone that it never sought to be acquired, and that the would-be buyers, led by the Ontario Teachers Pension Plan, were the ones that put the company in play.

There is an argument to be made that BCE is better off than it was before the buyout bid, with new management and reduced costs, but if there was a chance that $1.2 billion was still sitting on the table, wouldn't you go after it?

For more:
- The Globe and Mail reports

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The BCE acquisition fell apart last week
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The BCE buyout was proposed in the summer of 2007