The fallout from the collapse of the planned leveraged buyout (LBO) of Canada’s BCE looks likely to end up in court following BCE’s decision to sue the private-equity buyers for pulling out of the deal. According to a Bloomberg report, BCE – parent company of Bell Canada and Bell Canada Mobility – said it is seeking a C$1.2 billion (US$1.01 billion) break-up fee following the earlier decision by the private equity consortium to withdraw from the deal because of solvency concerns. “The purchaser’s purported termination was premature and invalid,” BCE said in a statement. It is believed that the deal collapsed because of the current crisis in the world’s credit markets, which led to concerns that the buyout would see the new company take on too much debt and meant that the deal failed to meet required solvency tests. However, BCE said that the failure of the transaction to close “was directly related to both the burden of the loan financing arranged by the defendants and the deterioration in global market conditions, each of which was a risk borne by the defendants.” The private equity consortium – led by Providence Equity Partners and Ontario Teachers’ Pension Plan – had argued in an earlier statement that “neither party owes a termination fee to the other” in such circumstances.

The CAD52 billion (US$43.6 billion) LBO was first announced in June 2007 and, at the time, was considered the largest private-equity deal in history. Following the collapse of the deal, speculation has tuned to other potential buyers. One possible suitor is considered to be rival Canadian telecoms group, Telus, though Telus’ chief financial officer Robert McFarlane told Reuters this week that the firm was “not working on an acquisition of BCE.” A merger between Telus and BCE – two of Canada’s top three telecoms firms – would also face regulatory issues, the report said.