(Bloomberg) — BCE Inc. agreed to acquire an Internet service provider in the Pacific Northwest, giving a surprising boost to the U.S. market in its quest for faster growth. Shares fell to an 11-year low.
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Canada’s largest telecommunications company will pay C$5 billion ($3.6 billion) for Northwest Fiber LLC, which does business as Ziply Fiber and has 1.3 million locations in Washington, Oregon, Idaho and Montana, with plans to expand to more than 3 million in the coming years. four years, according to a statement on Monday.
The company will finance the majority of the deal with proceeds from the sale of its stake in Maple Leaf Sports & Entertaiment Ltd., owner of the Toronto Maple Leafs and other sports franchises, to Rogers Communications Inc. That transaction was announced in September.
BCE executives told analysts that with the two deals they were trading a minority stake in a sports asset for a company that is within their field and can open new growth prospects. Chief Executive Officer Mirko Bibic did not rule out the possibility that the company will make more such transactions.
“This transaction is a bold approach to growth, anchored in what we do best in a company we know very well,” Bibic told analysts. “Simply put, the operational and geographic diversification will make Bell even better.”
BCE fell the most in more than four years after the company said it will pause dividend increases and raise new equity from shareholders through a dividend reinvestment plan, also known as a DRIP, that allows investors to buy new shares at a discount. The stock fell 7.3% to C$41.52 in Toronto, the lowest since August 2013.
BCE, which does business as Bell, has been under financial pressure lately due to a slowing wireless market, high capital expenditures and a high dividend – its shares yield more than 9%. The company has spent heavily on building out its fiber-optic network around Canadian cities to bring faster internet speeds to homes and businesses, making it more competitive in the battle for market share with cable companies like Rogers and Quebecor Inc.’s Videotron.
When the company announced the sale of its 37.5% stake in MLSE in September, many analysts saw it as a way to reduce its debt burden. Instead, BCE says it expects net leverage to remain “relatively unchanged” from current levels.
