BCE to acquire Manitoba Telecom Services for nearly $4 billion

BCE Inc. (TSX: BCE) (NYSE: BCE), Canada's largest communications company, is about to get larger. The company says it has agreed to acquire Manitoba Telecom Services Inc. (MTS; TSX: MBT) for approximately CAN$3.9 billion.

BCE Inc. (TSX: BCE) (NYSE: BCE), Canada's largest communications company, is about to get larger. The company says it has agreed to acquire Manitoba Telecom Services Inc. (MTS; TSX: MBT) for approximately CAN$3.9 billion.

The company also announced that, upon the transaction's close, it will immediately divest a third of MTS's postpaid wireless subscribers to TELUS Corp. (TSX: T, NYSE: TU). Financial terms of that deal were not disclosed.

BCE says it will invest CAN$1 billion in MTS's infrastructure over five years to enable it to provide similar services to those it currently offers via its Bell Canada and Bell Aliant operations. BCE says the investments will enable:

  • availability of the company's Gigabit Fibe Internet service, at download rates on average up to 20X faster than those MTS currently offers, within a year after the transaction closes.
  • the rollout of Fibe TV, Bell's broadband television service.
  • accelerated expansion of the company's LTE wireless network throughout the province.
  • integration of MTS's Winnipeg data center with Bell's national network of 27 data and cloud computing centers.

Upon closing, the combined company's Manitoba operations will be known as Bell MTS. Winnipeg also will become Western Canada headquarters for Bell and, with the addition of MTS's 2,700 employees, Bell's Western team will reach 6,900 people.

"Welcoming MTS to the Bell group of companies opens new opportunities for unprecedented broadband communications investment, innovation, and growth for urban and rural Manitoba locations alike. Bell is excited to be part of the clear growth opportunities in Manitoba, and we plan to contribute new communications infrastructure and technologies that deliver the latest wireless, Internet, TV and media services to residents and businesses throughout the province," said George Cope, president and CEO of BCE and Bell Canada.

BCE will acquire all of the issued and outstanding common shares of MTS for CAN$40 per share, which will be paid via a combination of BCE shares and cash. MTS shareholders will be able to elect to receive $40 in cash or 0.6756 of a BCE common share for each MTS common share, subject to pro-ration such that the aggregate consideration will be paid 45% in cash and 55% in BCE common shares. The share consideration is based on BCE's 20-day volume weighted average price of $59.21.

BCE will fund the cash component from "available sources of liquidity" and will issue approximately 28 million common shares for the equity portion of the deal.

The acquisition agreement also enables BCE to match any superior proposal MTS may receive before the current agreement closes. If BCE does not exercise its right to match, BCE would receive a termination fee of CAN$120 million. Conversely, MTS could receive the same amount if the deal fails to close for other reasons that were not made public.

BCE expects the deal to close by the end of 2016 or early in 2017.

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