MTS considered SaskTel merger, Telus and Rogers declined to bid

An information package for Manitoba Telecom Services Inc. shareholders sheds some light on the genesis of the proposed $3.9-billion acquisition of the company by BCE Inc., announced May 2. According to the 192-page document outlining various terms of the agreement in which shareholders could receive $40 cash per MTS share, it was a week-and-a-half-long process from offer to public announcement. But the real work started in on the first day of 2015 with the appointment of Jay Forbes as MTS CEO, who undertook a strategic review that was completed by early May. The review culminated in a new strategic focus that included offloading its business communication division, Allstream, which it purchased in 2004, and improving the company’s profitability and market share. Allstream’s sale closed Jan. 15, but during the interim months, both Bell and Telus Corp. “informally raised the possibility of exploring a potential acquisition of MTS.” Since the company was focused on the Allstream transaction and its own makeover, “no serious discussions ensued.” Due to this interest, the MTS board of directors brought on some advisors and “undertook a thorough analysis of the Company’s strategic paths,” which included pros and cons for a variety of scenarios, including merging with Saskatchewan Telecommunications Holding Corp. The analysis suggested to the board that purchase by a “Canadian strategic purchaser” was likely the best bet and “authorized meetings to take place with senior representatives” of Bell, Telus and Rogers Communications Inc., letting them know that though MTS was focused on its own overhaul, “it intended to be prepared to respond if an offer that was compelling” came in. That compelling offer came along on the morning of April 21, when Bell president and CEO George Cope and Forbes both found themselves in Los Angeles, Calif., and met at Cope’s request. Cope presented an offer that included the $40-per-share price, as well as the $1 billion investment over five years in Manitoba. A board meeting to review the offer was scheduled for four days later, and in the interim, since it had previously expressed interest, Forbes contacted Telus CEO Darren Entwistle to let him know MTS had another offer on the table and to give him the opportunity to make his own pitch. Entwistle responded on the day of the April 25 board meeting, letting Forbes know Telus would not be making an offer. Forbes also had conversations with Cope, who let him know that after the initial offer from Bell, the company “had received an unsolicited offer from Telus to acquire certain assets of MTS from BCE, should BCE complete an acquisition of MTS.” Those assets were one-third of MTS’ post-paid wireless subscribers and one-third of its dealer locations. The final details were hammered out in the remaining days before the May 2 announcement, including lowering the penalty if MTS backs out of the deal by $5 million to $120 million. Along with shareholder approval — of which two-thirds agreement is required — the deal must also be approved by the Toronto and New York stock exchanges, the CRTC, the Competition Bureau and Innovation, Science and Economic Development Canada. Shareholders vote June 23 in Winnipeg. — With reporting by Charelle Evelyn at cevelyn@thewirereport.ca and editing by Anja Karadegliga at akarad@thewirereport.ca

MTS considered SaskTel merger, Telus and Rogers declined to bid

News | June 2, 2016

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