George Cope, President and Chief Executive Officer of BCE, addresses shareholders at the company's Annual General Meeting, in Toronto April 30, 2015.FRED THORNHILL/Reuters
Another big Canadian company has surprised investors with a rare share sale after BCE Inc. raised $750-million in a snap financing.
Late Monday, the telecommunications giant announced a large bought deal to raise money for general corporate purposes and to help pay down debt. The common-share sale is BCE's first since 2002, when it raised $1.8-billion.
The deal comes in a unique market. Share prices of commodity-driven companies continue to suffer, while non-resource businesses are often rewarded with premium valuations. BCE's stock continues to climb and its closing price of $58 on Monday is near the record-high of $59.00 it set in October. By raising money at such a rich valuation, BCE can issue fewer shares than it would have had to at a lower price, which makes its dividend more affordable. The telco also issued the shares at a tight 1.6-per-cent discount to its closing price; anything under 2 per cent suggests the issuer expects strong demand for its offering.
Canadian investors continue to be surprised by new deals. Unexpectedly, National Bank of Canada raised $300-million earlier this fall after markets gyrated, forcing the lender to add an extra capital cushion to its balance sheet.
BCE's financing was one of four non-resource deals to hit the Canadian market Monday, raising $1.15-billion in total. Because all the shares were sold by way of bought deals, the issuers get their money up front and the underwriters are liable for any unsold stock.
At the moment, BCE's net debt amounts to 2.6 times its earnings before interest, taxes, depreciation and amortization. The company hopes to lower that ratio to between 1.75 times and 2.25 times; the share sale will lower it to 2.5 times.
Because the financing is so rare for BCE, some investors may wonder if the company will use the funds for an acquisition of some sort. Someone familiar with the offering stressed this won't happen; the telco is taking advantage of a hot stock.
With files from Christine Dobby
Tim Kiladze