Bell Canada Makes Effort To Save BuyoutBell Canada Makes Effort To Save Buyout

With the final hours ticking away on the $50 billion buyout of Bell Canada (BCE) -- the biggest proposed buyout ever -- Canada's largest telecommunications company reported that it has hired PricewaterhouseCoopers LLP (PwC) to challenge a solvency report that threatens to doom the buyout.

With the deal's completion deadline looming Thursday, BCE's hiring of PwC is aimed at countering an earlier solvency report conducted by auditing firm KPMG, which earlier failed the deal's solvency and effectively killed the buyout.

In a statement, BCE didn't hold out much hope for salvaging the buyout.

"While BCE believes that PwC's work supports the Company's position, PwC has not been engaged to provide the solvency opinion required in connection with the closing of the transaction," the company said. "The receipt at the effective time of a positive solvency opinion from KPMG remains a condition to close."

Citing "sources close to the buying group," the Toronto Globe & Mail reported that the second opinion on solvency is likely to be used by BCE during the legal battles that are expected to take place after Thursday. Several buyout firms and banks were involved in financing the takeover, but when global financial markets began their relentless meltdown, key players sought to distance themselves from the deal.

The PwC deal represents something of a Hail Mary effort, because its report is the only opportunity BCE has to save the buyout -- KPMG must reverse its solvency opinion by Thursday. In its statement, BCE noted that "Should KPMG be unable to deliver a favorable opinion on December 11, 2008, the transaction is unlikely to proceed."

The lead investor in the buyout is the Ontario Teachers' Pension Plan with supporting roles held by Providence Equity Partners LLC, Merrill Lynch Global Private Equity, and Madison Dearborn Partners. Others involved in the deal include Citigroup Inc., Deutsche Bank AG, Royal Bank of Scotland Group PLC, and Toronto Dominion Bank.

The deal dates back to the spring of 2007 when Canada prepared to deregulate its telecommunications markets. Canadians had watched the agonies of the U.S. telecom deregulation including the breakup of the old AT&T more than two decades ago and, happy to avoid that painful breakup and reassembly of the U.S. market, moved ahead with the Ontario Teachers' Pension Plan spearheading the buyout effort.

For months, the deal was on track to become the largest buyout ever, but then the meltdown in global financial markets began, threatening the economics of the buyout. The total amount of the deal has been estimated at between $40 billion and $51 billion, with the numbers changing according to which player was speaking.