BCE deal is dead: quick and dirty thoughts

As almost an epilogue on the closing of the age of financial excess, the largest proposed privatization in history is now officially off since BCE (aka Bell Canada) could not meet the solvency test (i.e. the company would not be solvent after the privatization given the newly incurred debt load created by the deal combined with the falling price of its assets) proving, in some instances, the pen, when wielded by the accountants, is indeed mightier than the sword. As with any large deal that craters, enter the phalanx of lawyers to point fingers and extract a pound of flesh.

Just some quick and dirty thoughts on this deal:

1. This deal was a farce on the entire notion of shareholder rights. An under-performing company feels pressure from shareholders to perform and, rather than become more customer-focused, offer better pricing and product lines and actually become a better business, the Board of BCE basically allowed the investment bankers, hedge funds, pension funds and institutional players to run rough-shod all over the business and enrich themselves on some crazed debt and fee fueled deal with a million moving parts.
2. There was a lot more press about break-fees and debt tests than actually, oh I don’t know, making BCE a better company; if you are not a customer of BCE, it is a terrible customer-service company and the root of its problems is not its earnings per share lag or it didn’t pay enough dividend. Really, the fundamental business issue is that it lost small cities of customers a year with crap customer service.
3. Yet, no one on Wall Street ever thought that would actually be the cure for BCE’s problems did they? An i-bank can’t earn fees telling BCE to actually care about their customers can they? Remember that Wall Street often cloaks making their fees and profits under “shareholder rights.” Getting in bed with hedge funds and i-banks to advocate that a company do something, anything, to pump up share prices is truly a deal with the devil for the retail investor.
4. Does BCE ever have to buy themselves out of this mess with their tried and true shareholders. Suspending a dividend on a widows and orphans dividend yield stock is not exactly the way to endear yourself with your loyal shareholders is it? Remember Wall Street is with you win or tie. But in down times? Its Main Street that carries a company. Somehow everyone forgot that in the last 5 years.
5. Why did we trust the Teachers’ Pension Fund to see this deal through successfully? They own a large stake the Toronto Maple Leafs-an appallingly bad hockey team- and have fiddled while Leaf Nation burns (I use to be a hockey fan; can’t stand the product anymore). They also have a pension shortfall in the billions.  Shouldn’t that tip us off that, like the Leafs, its all hype and no performance?
6. Is BCE actually a good buy now? Not sure, but its share price is worth less than its NAV and, if the company buys itself out of this mess with a generous dividend, maybe its worth a look.
7. Do Michael Sabia (the CEO who came up with this idea) and Robert Milton (the CEO of Air Canada) have drinks and share ideas on how to take a monopoly and screw it up?
8. Well, at least the lawyers have a lot of work in 2009 now. Maybe an old law school colleague or two could buy me dinner with all the fees they are about to make.
9. You realize the accounting firm that gave the solvency opinion that tanked the deal are also the auditors for many of the same banks who were going to lend out money? Conflict of interest anyone? Maybe its time to break up the accounting firms…
10. No post tomorrow. If you are a shareholder of BCE, lobby hard for your own privatization blues bailout- a nice juicy “we’re sorry” special dividend.

Enjoy the weekend.