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. Last Updated: 07/27/2016

Canada Telecom to Shed $53Bln Nortel Stake




MONTREAL -- BCE Inc., Canada's largest telecommunications group, said Wednesday it was spinning off a 77 billion Canadian dollar ($53 billion) stake in Nortel Networks Corp. to shareholders, leaving it with just 2 percent of the major communications equipment maker.


Under the proposed plan to give shareholders a 37 percent chunk of Nortel stock - valued at about 77 billion Canadian dollars based on Wednesday's share price on the Toronto Stock Exchange - a new publicly traded Canadian company will be created that will own all of the common shares of Nortel.


Nortel public common shareholders will receive one common share in the new company in exchange for each Nortel common share they now hold, so that their level of investment is retained. BCE shareholders will keep their BCE shares and get about 0.78 of a common share, subject to adjustment, in the new company for each BCE common share.


BCE and Nortel said they signed a definitive deal, approved by both boards, to implement the planned transaction through a plan of arrangement. The arrangement is expected to be completed by the second quarter.


Shareholders will receive an annual aggregate dividend of 1.37 Canadian dollars per share, 1.20 Canadian dollars from BCE and roughly 17 Canadian cents (12 cents) from Nortel.


BCE president and chief executive Jean Monty told a conference call that the group has no immediate plans to spin off other parts of its telecom empire, which includes Canada's largest telephone carrier Bell Canada.


Monty said BCE's stock has been trading at a roughly 30 billion Canadian dollar discount to the value of its underlying assets. That represents a discount of about 47 Canadian dollars a share.


"With shares that are more properly valued, BCE can grow and expand its business using BCE stock as currency for acquisitions," Monty said.


Nortel hailed its new independence and said being a widely held company would make it stronger.


"We enthusiastically support the proposed plan and believe this is a win-win for all Nortel Networks' shareholders," John Roth, Nortel's president and chief executive said in a statement.


"It will put us on an equal footing with our peers, in that our ownership and stock will be widely held. This will make Nortel Networks even stronger, unleashing us as a truly independent, Canadian-based global company focused squarely on the growth engines of the Internet."