If the BCE buyout is dead, look for chief executive officer George Cope to roll out a shareholder-friendly Plan B that features an enormous share buyback and a generous dividend policy.
Mr. Cope and the BCE board must make every possible attempt to land the $42.75 takeover price struck with the Ontario Teachers' Pension Plan. No other option provides this kind of upside for shareholders. That's why the phone company executives announced Wednesday that they will challenge a KPMG solvency ruling that blocks the deal.
But if the KPMG decision stands, and it likely will, Mr. Cope and his crew will quickly move to life without a buyout. The team, and the board, have prudently prepared for this day.
BCE is flush with cash after selling divisions such as Telesat and suspending quarterly dividends. A large portion of this money – anything up to $4-billion is easy to justify – can quickly be deployed on a share buyback. That can only boost the stock.
BCE can also reinstate its dividend, with a much higher payout rate than previously used. With investors desperate for income, this would be a popular move. One knock against the company under previous CEO Michael Sabia was a reluctance to boost the dividend – Mr. Sabia was cautious with cash after weathering a financial crisis. Mr. Cope can start winning back the market's affection by returning a healthy chunk of profit to BCE's owers.
Once these quick and easy moves are completed, life gets more difficult for Mr. Cope. He's a proven telecom executive, but he faces the daunting task of boosting BCE's share price the old-fashioned way, by selling more cellphones, fighting off cable companies, cutting costs and improving profits.
However, business as usual has nowhere near the short-term benefits of a buyout. If the takeover is history, it will be a long time before BCE stock sees $42.75.
