Romain AdèsKerim Baccari

Alexis Lemieux-Cardinal

Scope of ReviewAssess Bell’s current value and provide opinion about the offer

Recommend Bell a course of action – accept, negotiate or reject

Analyze the position the CRTC would take in case the deal is accepted

Support our conclusion with financial models

Our mandate:

Agenda

Deal Overview

Decision Process

Recommendation

Financial Implications

Timeline

Deal Overview

Decision Process

Recommendation

Financial Implications

Timeline

Bell Canada Today• Canada’s largest communications

company– $17 billion in revenues in 2006– Market cap: $24 billion

• Largest shareholder: OTPP, 6.3%– Dissatisfied with stock’s performance

and quality of management

BLABLA

The Industry • Changing rapidly

– Extensive wireless penetration rates– Traditional telephone declining

• Heavily regulated by CRTC– Foreign companies prohibited from holding

more than 47% of a Canadian telecom company

• Main competitors– Rogers and Telus– New means of telecommunication

CRTC• The CRTC has a history of blocking acquisitions

– Telus – Mobilicity– Bell – Astral

• In order to maintain competition in the industry• Cautious about acquisitions by foreign

investors• Since acquisition will not decrease competition,

and since OTPP will participate in transaction– CRTC is likely to allow the acquisition– But might intervene to ensure compliance to

regulations: lenghty process

BLABLA

Current Situation - Financials

• blabla

BLABLA

Deal Overview

Decision Process

Recommendation

Financial Implications

Timeline

Executive Summary

Bell Canada should recommend shareholders to:

Negotiate with the acquirers and accept an offer above $58.9 billion

Rationale – Decision Criteria

Financial Profitability

Form of PaymentPost-Transaction

Intentions (management)

Transaction RationaleFinancial Improvement• Increase enterprise value and earnings• Potential to capitalize on operational synergiesStrategic Positioning• Penetrate the catering industry; a lot of growth

potential• Competitive advantage by offering both catering and

rental servicesOperational Efficiency• Considerably increase business with less than

proportional increase in resources

Our Options

Bell Today

Sell

Accept offer

Negotiate

Do not sell

Strategic repositioning

within industry

The Decision

Bell Financial Profitability

Post-Transaction Intentions

Form of payment

Do not sell o o o

Accept Offer - o/- +/-

Negotiate + o/+ o/+

BLABLA

Deal Overview

Decision Process

Recommendation

Financial Implications

Timeline

What You Should Do

• Negotiation:– Acquisition price– Conditions: protect management for a

certain period of time

Advise the board of directors and the shareholders to:

Negotiate and accept offer above $58.9 billion

Deal Overview

Decision Process

The Acquisition

Financial Implications

Timeline

Perspectives on Valuation

BLABLA

Finding the WACC

BLABLA

Discounted Cash Flow Analysis

BLABLA

Comparable Valuation

BLABLA

Deal Overview

Decision Process

The Acquisition

Financial Implications

Timeline

Timeline – Acquisition Process

Negotiations and Closing

Negotiate and sign definitive agreement

Closing

Due Diligence and Preparation

Marketing

Preparation of management presentation

Initiate contact with buyers

Activity

Due diligence meetings

Information Memorandum

Finalize buyer list

Deliver Information Memorandum

Finalize management presentation and data room

Buyer due diligence

Receipt and review of final proposals

Organizational meetings

Action

Weeks

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Timeline – Acquisition Process

Develop approach strategy and script

Approach targetExecute

Confidentiality Agreements

Initial value workAssess competitive

landscapeSeek internal

approvalsPrepare non-binding

expression of interest

price range offer structure diligence

requirements

Management meetings / presentations

Complete due diligence process

Integration planning

Establish PR strategy

Refine value workAssess competitive

landscapeDetermine financing

planSeek internal

approvalsPrepare binding offer

price offer structure deal protection

Negotiate agreement with target

price deal protection reps and

warranties transaction

agreements

Announce transaction

Manage public relations around announcement

Issue transaction documentation

Solicit shareholders for support of offer

Obtain necessary approvals

Complete acquisition

Close Transaction

Approach Target

Initial Bid Due Diligence Final BidExecute Definitive Agreement

4 to 6 month process

Risk MitigationRisks of

acquisition• Lengthy

process / delays• CRTC

intervention

• Buyers change management

Mitigation• Make exclusivity

period shorter• Take legal action

if benefits > costs

• Negotiate terms of deal to protect management

Key Takeaways

Negotiate sales price, accept above $58.9 B

Ensure management’s protection by negotiating terms

Obtain premium higher than in initial offer