The $52 billion sale of BCE, Inc., Canada’s largest telecom operator, to a private equity consortium is facing a fresh legal challenge in the form of a class action lawsuit, brought by holders of the company’s common stock, that seeks $588 million plus punitive damages for recovery of dividends that were suspended during the second and third quarters this year. Last spring, BCE agreed to sell itself for $40.12 per BCE share (plus the assumption of $19.3 billion in debt) to a group linking the Ontario Teachers Pension Plan with Providence Equity Partners and Madison Dearborn Partners. If it closes as scheduled on December 11 and under the original contract terms, the transaction would rank as the largest leveraged buyout in history. In June, the Supreme Court of Canada struck down the decision of a Quebec appeals court to block the deal. (The Quebec court had issued the injunction at the urging of BCE bondholders who argued that the agreement of Bell Canada—the issuer of the debt held by the bondholders—to guarantee loans incurred by BCE’s private equity buyers was unfair.) The shareholder suit filed last week centers upon BCE’s decision in June to suspend the payment of quarterly dividend payments at the request of a banking consortium that is providing $32 billion in funding for the deal. Charging that BCE failed to seek shareholder approval, the class action plaintiffs told a Saskatchewan court that BCE acted “in bad faith” and “continues to act in a way that is oppressive and unfairly prejudicial to, and unfairly disregards, the interests of class members.” The judge involved in the case could decide to impose an injunction that would delay the deal until litigation is concluded, although such a move is considered doubtful. A spokesman for BCE also declared that the suit “is completely without merit and will be vigorously defended.”
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Shareholders file class action suit against BCE buyout
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