BCE take-over bid rumoured

March 29, 2007

The Globe and Mail have reported today that KKR (one of the world’s largest private equity firms) is planning on launching a friend take-over bid for BCE. Apparently KKR has already met with BCE’s management twice about the buy-out, although neither company is commenting at this time.

BCE is currently trading at C$30.13, giving it a market capitalisation of C$24.3bn, and has net debt of c. C$12.3bn, giving the company an Enterprise value (“EV”) of c. C$36.6bn. Compared with other North American wireline operators BCE looks a bargain. One of the metrics typically used to value companies in the Telecoms industry is EV/EBITDA, EV being the Enterprise value (marketcap + net debt) and EBITDA being Earnings before interest, depreciation and amortisation (a proxy for cash flow before any investments). BCE is currently being valued at an EV/EBITDA of c. 5.2x, which is low compared to other North American wireline companies (average is c. 6.0x). In addition, the fact that Canada’s Telecom industry is less competitive than the US and Europe, as well as there being lower wireless penetration, make BCE an attractive target.

The Globe mentioned that typically there would be a takeover premium of 15-20% in deals like this, but as the company is already undervalued this premium could be higher. Lets assume a 20% premium, this would result in a transaction cost of C$41.5, making it by the largest of Leveraged buy-out (“LBO”) in Canada and also one of the worlds. What makes this particularly interesting is that Canadian regulations stipulate that a foreign firm can not own more than 46% of a Telecom operator. KKR is apparently looking to form a consortium with Canadian PE and pension funds to make the deal happen, including the Ontario Teacher’s Pension Plan (who currently own 5.3% of BCE). It will be very interesting to see what firms they are able to find in Canada with deep enough pockets to do this.


Canada’s technology un-innovation

March 29, 2007

 Canadian Beaver

The World Economic Forum (“WEF”) has released their annual ranking of the most technologically innovative countries. The WEF ranking measures the technological environment offered by a given country, the readiness of the country’s key stakeholders (individuals, businesses, and governments) to use technology, and finally the usage of technology. The big news according to the BBC is that the US has fallen from the top spot to being #7, having been overtaken by Nordic countries (Denmark #1, Sweden #2, Finland #4). Unfortunately, Canada’s performance has been lacklustre and has fallen 5 places, out of the top ten, to #11.

The report gave the following reasons for Denmark’s success:

Denmark has benefited from a clear government ICT vision and early focus on ICT penetration and usage, which has resulted in impressive levels of Internet and PC usage as well as that of e-government and in a very dynamic e-business environment. A well-developed internal market, together with a continuous emphasis on education and R&D and a talent for pioneering applications and technologies, have laid the basis for the development of a first-league high-tech industry.

Norway and Iceland have also done very well, ranking in at #10 and #8 respectively, putting all Nordic countries in the top ten. While Nordic countries are quite similar to Canada, in that they both have abundant natural resources and leftist/social politics (and chilly climate), but the Nordic countries have been much better at leveraging these natural resources to create modern and innovative economies. 

Historic Canadian ranking:
2003-04: 6
2004-05: 10
2005-06: 6
2006-07: 11

Great video: Don’t come around here no more

March 20, 2007

 Stumbled across this classic video while searching Youtube for a song I heard on the radio. The song is “Don’t come around here no more” by Tom Petty and was a hit single in 1985. The video is based on the book Alice’s Adventures in Wonderland and features Petty dressed as the Mad Hatter chasing Alice around and then eating her as if she were a cake. I bet this video is even better when high. From what I remember from “Popup video” there was actually some controversy surrounding the video because feminist groups didn’t believe women should be treated like cakes. They should be baking them.

 Take a listen:

Update: Lord Black

March 16, 2007

Came across a pretty good summary of all the charges against Lord Black. I haven’t exactly read it myself, but it looks pretty good.

Also in related news, the Globe and Mail are reporting that Donald Trump will testify for the defense. I probably would have gone a different way on this one, I probably would have picked someone with a better ethical record, I mean they might as well have asked Henry Kissinger… oh, he’s testifying as well? Kenneth Lay is dead right? 

Start me up

March 13, 2007

Now that I’ve resigned (but still have to work until the end of April), I have more free time to start thinking of my future what I should do next. To that end, I’ve started reading about startups and entrepreneurship while at work and have come across a new site called Startupping. Rather then summarise it myself, read from the site itself:

Startupping is a one-of-a-kind community resource created for Internet entrepreneurs by Internet entrepreneurs. It is a place to share information, ask questions, and tap into the experience of others who have built and are building web businesses. Read blog posts about startup issues, participate in our discussion forums, and view our wiki resources, including sample term sheets and a glossary. For more information about the Startupping site, see our about page.

I’ve taken a look around and there seems to be quite a bit of content for a site that just launched with information on a wide range of topics. I took a look at what they had on financing and valuation (my area of expertise) and it seemed a bit sparse. Once I fully stop working I might see what I can add as the site encourages read contributions, much like Wikipedia.

Good stuff: Lord Conrad Black

March 12, 2007

 Lord Conrad Black

This man may be extremely arrogant… he may have given up his Canadian citizenship (a sin!)… he may have used corporate money to pay for trips to Bora bora and parties for his wife… he may even have scammed millions out of shareholders… but damn it if I don’t respect the guy.

I’m not going to try to defend what he did, hell, I’m not exactly sure what he’s even done. I’ve done some research (by research I mean reading random websites) and it doesn’t seem like the press have any detailed knowledge of how he’s committed fraud, other then to say “it’s complex.” It was an easy story to jump on to, with the public wanting blood from this famously arrogant and ostentatious tycoon.

Recently, public opinion and even the press (see this Globe and Mail article) have been warming up to Black as he makes  moves to change his public image. All of a sudden he has become a “demonstrative Canadian flag waver” (his words), trying to negate the fact that he gave up Canadian citizen to become a member of the British House of Lords. He’s also been framing himself as David, with the “left-wing press” and government as Goliath, take a look at a choice quote from a court filing:

since “Biblical times, and probably before, the wealthy have been envied and condemned.”

Fan clubs have also sprung up, such as the Adhoc Committee for Conrad Black which is organising caravans to Chicago to support Lord Black at court and is also taking “symbolic pledges.” In a crazy moment of pure spontaneity and unbridled enthusiasm, I joined the committee and pledged £1,000 of my very own fake money to the cause… I hope I don’t regret it in the morning. I had originally planned to use that money to feed the poor homeless Elves in the online game Everquest, but I thought Lord Black was a better fake cause (sorry Sean, uhh I mean Xanthorian the High Elf Wizard, we will save your people someday, I promise).


The whole Lord Black support club thing comes across as a bit disingenuous to me, as if these guys are a bunch of ass kissers and are betting on Black’s rise to power again so they can say, “I supported you when you were down! I even pledged £100,000 to your cause! Can we be friends?” I know that’s why I joined.


Good stuff Lord Conrad Black.

I just resigned… time to buy a bespoke suit?

March 8, 2007

James Bond 

I’ve now officially resigned having given my resignation letter to my boss today. This was actually the first resignation letter that I had ever written so I turned to the internet to look at some samples. I was disappointment to find that there was very little variety to choose from, but then I thought “Do I really care?” The answer was no. So I copied and pasted the shortest one I could find and handed it in.

Anyways, on the tube home I read an interview in the paper with a guy that started a business called A Suit that Fits which makes bespoke suits at a fraction of the price of other established tailors such as those on Saville Row. I’ve looked at bespoke suits in the past and they cost around £1,000 – 2,500 (CDN2,300 – 5,750), I’ve put it off in the past as I’ve wanted to get into better shape before I get measured. My thought process was that if I’m going to spend that type of money I want it to still fit in the future – and I plan on staying fit.

To give you some idea of the difference in price, I went through the process of creating a suit on their website, usually choosing the more expensive options and the price only came out to be £280 (CDN644). The price difference is huge and of course the only thing that matters is the quality of the fabric and tailoring. At this price I am extremely skeptical, but I do need a new blue suit… and the price is so low… it’s tempting to just roll the dice and see what I get.

I also think its an interesting business idea – if they can actually deliver what they promise (high quality tailored suits to the masses). I wonder how well the idea would export to North America, one of the founders did say he’d like to launch in New York. How about Toronto?