HomeBusinessBCE falls to 12-year low after $3.6 billion Ziply deal

BCE falls to 12-year low after $3.6 billion Ziply deal

(Bloomberg) — BCE Inc. will pause dividend growth next year as it makes an unexpected push into the U.S. with the purchase of an Internet provider in the Pacific Northwest, a move that sent the company’s shares to a 12-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 announcement comes less than two months after BCE unveiled a deal to sell its stake in Maple Leaf Sports & Entertainment Ltd. to Rogers Communications Inc. to sell for C$4.7 billion. BCE said at the time that the transaction would help reduce debt, which credit agencies and analysts had identified as a problem in recent months.

But BCE now says it will use these proceeds, an expected net amount of C$4.2 billion, to finance the bulk of the Northwest Fiber deal. The company also ruled out an increase in its dividend for all of 2025 – after 16 years of annual payout increases – and said it will raise new equity through a cut to its dividend reinvestment plan, known as a DRIP.

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The plan to halt dividend increases, a key part of the investment thesis for shareholders of the major Canadian telecom companies, sent BCE’s shares tumbling the most in more than four years. Shares fell 9.7% to close at C$40.47 in Toronto, the lowest closing price since May 2012.

Chief Executive Officer Mirko Bibic said the company did not decide to acquire Ziply “based on an assessment of one day’s stock market reaction,” noting that sell-side analysts have speculated for some time that the company dividend growth would pause and a DRIP discount to strengthen the capital position.

“We are managing this for the long term,” he said in an interview, adding that “pursuing a fiber growth agenda is the right strategy and is at the heart of what BCE does really well.”

Discussions with the management team of Northwest Fiber, which is owned by Searchlight Capital in partnership with three Canadian pension funds, did not begin until late September, after the MLSE transaction was announced, Bibic said.

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