Another puzzling sign surfaced at BCE this week, when its board announced that it had established a special committee to handle its friendly going private transaction involving Canada Pension Plan and KKR. Unless BCE has gone into the acrobatics business too, it seems to be making a habit of getting things backwards.
First, there was the blanket denial of March 29th regarding any intention to pursue a private equity deal. That was reiterated on April 10th. Many investors relied upon those statements, and, judging by the calls and email received at The Centre for Corporate & Public Governance, some sold their shares as a result. Then, out of the blue, BCE twisted itself into a pretzel and announced that it was happy to do exactly what it said it had no intention of doing just a few days earlier and named CPP and KKR as friendly suitors to the deal.
One would have expected BCE’s board to have established a special committee prior to the company’s announcing its decision to explore a going private transaction —not after. This gives rise to the impression that the decision announced on April 17th was not entirely thought through. Given the scale of the potential transaction and BCE’s prominence in Canada’s capital market, this is less than encouraging.
The fact that management appears to be leading the process, and has selected partners it feels comfortable with, is also troubling. In these kinds of situations, management typically wants to do what is in the best short-term interests of management and not necessarily what is in the long-term interests of shareholders. BCE’s board has a history of being overly deferential to management, as the costly fiasco involving the company’s purchase of Teleglobe, at former CEO Jean Monty’s insistence, illustrates.
It is the board that needs to be carefully and undeniably setting the tone for these discussions. That voice is too faint and its timing has been unimpressive thus far.