BCE Inc. Decision: Lessons For Directors And Debentureholders

On December 19, 2008, the Supreme Court of Canada delivered a unanimous judgement on an action commenced by a group of Bell Canada debentureholders seeking to stop the sale of BCE Inc. ("BCE") to a buyout group, led by the Ontario Teachers Pension Plan Board. The June 30, 2007 agreement between BCE and the buyout group contemplated the acquisition of all the shares of BCE pursuant to a plan of arrangement that would see Bell Canada (a wholly-owned subsidiary of BCE) and BCE hold an aggregate of $30 billion in debt, a substantial increase over their combined debt load prior to the acquisition. The crux of the debentureholders' complaint was the divergent effects of the proposed buyout on the economic interests of the BCE shareholders and those of the Bell Canada debentureholders. The proposed price of $42.75 per common share to be paid by the buyout group represented a 40% premium over the trading price of BCE shares prior to entering into the agreement. In contrast, the