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    Supreme Court to hear BCE appeal of Quebec decision  
    Toronto Star  

The Canadian Press

    June 02 , 2008  

MONTREAL–The $52-billion deal to privatize Canada's largest telecom company has survived another day after the Supreme Court of Canada agreed to hear an appeal of a lower court ruling that threw the BCE Inc. (TSX: BCE) takeover into jeopardy.

The decision by a three-judge panel including Chief Justice Beverley McLachlin and Justices Louis LeBel and Louise Charron was released after markets closed.

A ruling against BCE on Monday could have forced a group led by the Ontario Teachers' Pension Plan to negotiate with bondholders or walk away from the deal.

The court agreed to hear the appeal June 17 for a total of two hours. BCE lawyers will file their submissions by June 6, followed on June 10 by the bondholders and interveners.

The bondholders had urged the court not to hear the appeal and argued the expedited process was not fair.

A lawyer for the bondholders declined to comment on the ruling.

"In view of the fact that the matter remains before the courts, we can give no comment," Mark Meland said in an e-mail.

BCE had said if the Quebec Court of Appeal's ruling to block the sale of the company is allowed to stand that it will change the way company directors fulfil their duties.

The parent company of Bell Canada said the appeal court made a mistake by imposing obligations on directors to consider and protect the economic interests of both the owners and creditors of a company.

Most industry observers had expected the Supreme Court to intervene.

"It does concern a fearfully large amount of money and an enormous number of vested interests and I suspect that's what persuaded them to listen to the arguments," Iain Grant of SeaBoard Group said in an interview.

Grant suggested that both sides may seek to reach a negotiated settlement to salvage the deal since it's not clear how the Supreme Court might rule. Some early estimates had suggested it could cost more than $1 billion to satisfy bondholders.

"The position of the Quebec Court of Appeal was quite compelling at 7-0, which would suggest that the deal is very much in jeopardy," he added.

BCE implored the Supreme Court to intervene, suggesting the Quebec court decision poses the threat of billions of dollars of value being destroyed for the company and its shareholders.

But the bondholders said BCE's "florid use of rhetoric does not elevate the appeal judgment to one of national importance."

"(They) confuse the size of the transaction with the legal importance of the decision," lawyers for bondholders wrote in a court submission.

"The fact that billions of dollars are involved in the subject transaction does not mean that the decision warrants the intervention of this court."

Although the purchasers have until June 30 to conclude the purchase, it can be delayed with approval from both sides.

BCE shares lost 40 cents, or 1.14 per cent to $34.65 Monday on the Toronto Stock Exchange. That's well short of the $42.75 offered by the private equity buyers.

Investors have also long feared that turmoil in capital markets may force banks to renege on the deal to finance the transaction.

Some suggested Monday that the purchase offer will be significantly reduced, perhaps to below $40 per share.


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