Wednesday, May 21, 2008

BCE Takeover

The latest news on the planned takeover of Bell Canada Enterprises by a group headed by the Ontario Teachers’ Pension Plan is that the deal is in trouble. Every few days the deal seems to swing between going ahead as planned and falling apart.

The main possible outcomes are

1. The deal goes ahead as planned at $42.75 per share.
2. The deal goes ahead at some lower price.
3. The deal gets delayed (perhaps permanently).

What amazes me is the number of people who believe they know which outcome will occur. I guess it’s normal for people to form opinions on matters they can only guess at, but it’s another thing to commit real dollars to these guesses.

I suppose that someone with detailed knowledge about banking as it relates to financing acquisitions might have a better shot than the rest of us at guessing the outcome here. But, this isn’t the case with the investors I know who have bought (and in one case shorted) BCE lately.

I count myself among those who don’t know what will happen. For me, buying a block of BCE shares wouldn’t be much different from dropping several thousand dollars on red and waiting for the roulette wheel to spin.

Far too many people who see themselves as stock-pickers are really just gamblers. As long as they only remember the good picks, they can maintain positive thoughts about their abilities. They’d better not gather all the information and work out how they’ve really performed over several years, though. Most stock pickers won’t like the answer they get.


  1. Big Cajun Man:

    Good question. I have no idea what the answer is. Maybe judges on the supreme court have an idea of whether the bondholder problem will go away before June 30th. Do any of them blog :-)

    1. The comment above is in response to Big Cajun Man's comment:

      After last night's court decision, you could make $10 a share if the decision is overturned (about a 33% pay back) and if you hold you still get dividends.

      Is it worth diving back in for more?


  2. Aside from the substantive legal issues, it'll probably be a challenge to get the the Supreme Court to hear arguments and render a decision before the June 30 deadline. From the reporting I've seen, this more than anything else seems to be the main problem. Perhaps the various loan and purchase agreements have outs if the parties are not able to close by the June 30 date.

  3. MMorgan:

    Given the size of this attempted takeover, it would seem to be important enough for the Supreme to expedite things and make a ruling well before June 30th. But, that isn't likely to happen given that the bankers and bondholders benefit if there isn't a decision on time. It seems that with most legal battles, one side or the other benefits from delays, and it's easier to delay a decision than it is to win a case.