BCE Sues Would-Be Buyers Over Breakup Fee

TORONTO (Reuters) – Telecom giant BCE Inc (BCE.TO) has sued its would-be buyers in a failed C$34.8 billion ($29.2 billion) takeover agreement over the collapsed deal’s C$1.2 billion ($1 billion) break-up fee.

According to a court document filed in the province of Quebec and posted on BCE’s website, the company says it’s entitled to the money from the buyers — a group of private-equity firms led by the Ontario Teachers’ Pension Plan. The buyers have said neither side is owed a break fee as a result of the deal’s collapse.

In its lawsuit, BCE asks the Superior Court that Teachers pay about C$704 million of the “now overdue” total, while U.S.-based Providence Equity Partners and Madison Dearborn Partners — two of the other buyers — shoulder the balance.

“Despite BCE’s demand for payment, the purchaser has refused or neglected to pay the break-up fee to BCE,” the company states, adding this breaches the terms of the buyout agreement. “The purchaser is liable to BCE for the full amount of the break-up fee.”

BCE had said last week that it believed the buyers ended the transaction “prematurely” and that it would be demanding payment of the fee.

The buyers said they would fight the suit.

“We are very disappointed that BCE has resorted to this litigation, which is based on the failure of a mutual closing condition that BCE insisted be included in the original acquisition agreement,” said Teachers, Providence and Madison Dearborn in an e-mailed statement.

“Neither party has a right to a termination fee in these circumstances,” they said. “We intend to vigorously defend against BCE’s claim, and we are confident that we will prevail.”

Analysts had speculated BCE might resort to litigation after the deal crumbled on Dec. 11. They also suggested an out-of-court settlement over the fee is possible.

The deal collapsed after BCE’s accountants, KPMG, ruled that the post-buyout company would fail a solvency test because of a huge debt load. A positive solvency opinion from KPMG was a condition of the buyout’s closing.

A Teachers’ spokeswoman was not immediately available for comment.

By Wojtek Dabrowski

($1=$1.19 Canadian) (Additional reporting by Megan Davies in New York) (Reporting by Wojtek Dabrowski; editing by Rob Wilson)