Friday, November 30, 2007

BCE – Still a Play?

As I’m sure everyone knows a consortium led by Teachers' Private Capital, Providence Equity Partners and Madison Dearborn Partners have made arrangements to acquire all of outstanding common and preferred shares of BCE. The deal is expected to close in the first quarter of 2008 and shareholders have overwhelmingly approved the $42.75 offered for each common share. Despite this fact (at the time writing) BCE is only trading at $39.40. This represents a discount of $3.35 or approximately 7.8%. Additionally, two dividends will be paid before the buyout for a total which will add another $0.73 per share. Combine the capital appreciation and the dividend income and that represents an upside of $4.08 or 10.3% between now and the second quarter of 2008. In my opinion a potential six month return of 10.3% is certainly very attractive in this environment. There is only one obvious risk to this scenario, the takeover does not happen. In my opinion the risk of this is minimal (but does exist) and I’ll probably be making a purchase of BCE in the near future.

5 comments:

FourPillars said...

Cheap & I have been discussing this for the last few months ever since Larry MacDonald brought up the profit potential quite a while ago.

I don't think the risks that the deal won't go through are minimal otherwise the price should be higher...but it does seem like a good opportunity.

Mike

MG said...

always the EMH believer...eh Mike

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