TORONTO-Canada’s telecommunications industry was shaken up with the announcement that Bell Canada Enterprises Inc. plans to distribute its 37-percent interest in Nortel Networks to its nearly 500,000 shareholders.
BCE at one point owned 100 percent of the company.
Under the plan, which has been approved by both companies’ boards of directors, a new publicly traded company will be formed that will own all of the shares of Nortel Networks. BCE shareholders will retain their BCE shares and receive about 0.78 of the new stock for each common share they hold. All current Nortel common shareholders will exchange their shares on a one-for-one basis for shares in the new company.
“The distribution of the Nortel Networks shares will begin to unlock significant and sustainable value for BCE shareholders,” explained Jean Monty, president and chief executive officer of BCE. “Nortel Networks’ stellar performance has overshadowed the underlying value of BCE’s other assets. In recent months, BCE’s stock has been trading significantly below the underlying value of its assets with an estimated discount exceeding $30 billion which is not being recognized by the financial markets.”
BCE has an international presence through Bell Canada International, with most of its operations in Asia and Latin America. Even with potentially larger returns on its stock, the company will not give specifics on any future expansion.
“Our focus over the past two years has been on building the scope of our operations, particularly the creation of major growth engines such as BCE Emergis and Bell Nexxia, and moving toward a more integrated operating model,” Monty said. “Building on our strong continuing base in Canada, we are now positioned to accelerate our growth through the expansion of communications services beyond Canada in selected growth areas.”
Even after the sale of Nortel stock, BCE will continue to be one of Canada’s largest companies with revenues exceeding $16 billion and assets of approximately $30 billion, according to the company.
BCE’s stock rose $12 on the news from $96.56 to $108.56, before settling at $99.25 at RCR press time.
