What a coincidence. BCE is now engaged in the very talks it previously denied were occurring to take the company private, with a group that includes KKR, the very company rumored before to be involved in the discussions —the discussions BCE said were not taking place. It might be regarded as a statistical amusement to some, but to investors it may well have amounted to a substantial loss. The Centre for Corporate & Public Governance has called on regulators to review discrepancies in the company’s statements.
BCE’s stock has been soaring since “speculation” about a possible LBO deal surfaced in March. In response, the company issued a statement on March 29th denying that talks were occurring in respect of privatization and claiming it had no plans to pursue such discussions. The stock continued to appreciate, nevertheless. On Monday, before BCE’s statement of today, there was a huge spike in volume and price at the start of the trading day both on the TSX and NYSE boards, which suggests a number of people decided over the weekend to buy BCE. Were the big transactions yesterday and BCE’s announcement today linked? That’s what regulators are supposed to guard against.
The kind of landmark move BCE disclosed today proceeds only after extensive meetings, analysis, preparation and discussions. It does not occur overnight. Board approval must be obtained from a number of players, as well as BCE. My point is that it stretches credulity for BCE to have asserted “there are no ongoing discussions being held with any private equity investor with respect to any privatization of the Company or any similar transaction” and that “the company has no current intention to pursue such discussions” —while less than three weeks later announcing that such negotiations are underway.
The question that needs to be addressed is: Were certain investors able to profit from information that such talks were occurring, while others did not because they were relying upon the information the company provided? The question takes on even greater significance in that just one week ago the New York Times cited a top BCE official as saying “Our statement of March 29th stands. We are not in any current talks with any other parties.”
There are vast sums in a company like BCE to be made or lost by its shareholders. Investor confidence is based on the principle —indeed the law— that all investors are entitled to material information that could affect the company at the same time.
Regulators need to act quickly to ensure that, in what might be the largest deal of its kind in Canada, involving one of its most valuable market assets, no shenanigans will be tolerated.