Canada's BCE to Buy Manitoba Telecom for $2.5 Billion

Canadian telecommunications giant BCE Inc. on Monday said it had reached a friendly deal to buy Manitoba Telecom Services Inc. for about 3.1 billion Canadian dollars (about $2.5 billion), a bid to expand its reach in the western Canadian province and to support continued dividend growth.

Montreal-based BCE said it will offer cash and stock worth C$40 a share for Manitoba Telecom, the main phone carrier in the province, and will assume net debt of about C$800 million.

The offer represents a premium of nearly 22% to Manitoba Telecom's closing price on Friday.

The deal underscores BCE's attempt to consolidate Canada's major regional incumbent phone carriers, giving it access to additional cash flows as a way to continue to fuel its dividend strategy. BCE most recently raised its dividend in February, which marked a dozen increases over the past seven years. Consistent dividend increases is a key reason investors hold BCE's stock, as its revenue growth remains under pressure. Last week, BCE reported a 0.6% increase in operating revenue for the first quarter of the year.

The acquisition by BCE, which in 2014 bought out the remaining stake in its Atlantic Canada regional affiliate Bell Aliant, is also a defensive strategy as its rivals bulk up wireless and content offerings to fuel growth. Fellow telecommunications company Shaw Communications Inc. earlier this year bought wireless carrier Wind Mobile to complete in the wireless space.

Corus Entertainment Inc., meanwhile, which competes with the company in the specialty television space, recently purchased the broadcasting assets of Shaw.

"Welcoming MTS to the Bell group of companies opens new opportunities for unprecedented broadband communications investment, innovation and growth for urban and rural Manitoba locations alike," BCE Chief Executive George Cope said in a release.

Following closing of the deal, Bell said it plans to invest $1 billion over five years to expand its broadband networks and services throughout Manitoba.

The deal, which has the support of Manitoba Telecom's board, is expected to close by early next year, subject to a number of conditions, including court, shareholder and regulatory approvals.

To help address competition concerns, BCE said it will sell one-third of Manitoba Telecom's postpaid wireless subscribers to wireless carrier Telus Corp. on closing. It will also assign one-third of the company's dealer locations in the province of Manitoba to Vancouver-based Telus.

For Manitoba Telecom, the takeover comes just months after completing a lengthy process to sell off its Allstream division. Zayo Group Holdings Inc. agreed to buy telecom-services provider Allstream late last year for C$465 million. That deal closed in January.

Write to Judy McKinnon at judy.mckinnon@wsj.com

(END) Dow Jones Newswires

May 02, 2016 09:35 ET (13:35 GMT)

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