BCE to acquire MTS for $3.9 billion, plans to divest one-third of the postpaid subscribers to Telus

Wireless competition in Canada may have just been reduced.

BCE, parent company to Bell’s wireless business, has entered into an agreement to purchase Manitoba-based MTS (Manitoba Telecom Services Inc.) for $3.9 billion.

The transaction is expected to close in late 2016 or early 2017 pending regulatory approvals. As for the terms, BCE has agreed to pay MTS shareholders $40.00 per share, which is reportedly above the current price by a staggering 23.2 percent, and “values MTS at approximately 10.1 times 2016 estimated EBITDA.” The total transaction value is about $3.9 billion but will purchase all shares for $3.1 billion and assume its debt of approximately $800 million. Both BCE and MTS shareholders and Board of Directors have agreed to the terms of the deal.

Bell has also agreed to open a western Canadian headquarters in Manitoba, which will employ 6,900 people (MTS currently has 2,700 employees). To show its commitment to the province, Bell will also build out its network in the region and invest $1 billion over the next five years, which will specifically see its Gigabit Fibe Internet be available 12 months after the transaction closes, expand its LTE network and release Fibe TV.

MTS currently has 565,000 subscribers and the terms also state that Bell will divest a third “of MTS dealer locations in Manitoba to Telus.” This number approximately represents 140,000 to Telus. Unfortunately, there is no indication as the dollar amount Bell will be selling the MTS subs to Telus for.

When the transaction closes, Bell and MTS have agreed to sell its services under the “Bell MTS” brand name.

Finally, fine print in the release reveals that if the “arrangement agreement is terminated in certain circumstances, including if MTS enters into a definitive agreement with respect to a superior proposal, BCE is entitled to a break-fee payment of $120 million.”

George Cope, president and CEO of BCE, stated, “BCE looks forward to being part of Manitoba’s strong growth prospects, building on the tremendous MTS legacy of technological innovation, customer service and competitive success by delivering the best broadband, wireless, internet and TV services to the people of Manitoba in communities large and small. As the headquarters for the Western operations of BCE, Bell MTS will focus on delivering the benefits of new broadband communications infrastructure, ongoing technology development and enhanced community investment to Manitobans everywhere.”

“This transaction recognizes the intrinsic value of MTS and will deliver immediate and meaningful value to MTS shareholders, while offering strong benefits to MTS customers and employees, and to the Province of Manitoba,” said Jay Forbes, President & CEO, MTS. “We are proud of our history and what we have achieved as an independent company. We believe the proposed transaction we are announcing today with BCE will allow MTS to build on our successful past and achieve even more in the future.”

[source]BCE[/source]