[Regulators Say Call-Net Can Avoid Fonorola Poison Pill Next Month]
(QWST looking at Fonorola? -- mark)
NEW YORK -(Dow Jones)- Canadian telecommunications firm Call-Net Enterprises Inc., which last month launched an unsolicited takeover bid valued at 1.6 billion Canadian dollars (US$1.11 billion) for Fonorola Inc., apparently will be able to bypass Fonorola's "poison pill" takeover-defense plan if Call-Net keeps its offer open until next month.
The Quebec Securities Commission Friday concurred with a ruling late Thursday by the Ontario Securities Commission, which said a cease-trading order would take effect on Fonorola's poison pill if there is a Call-Net (CNEBF) offer still outstanding as of 5 p.m. EDT on June 26. Call-Net's offer, launched April 27, is scheduled to expire Friday, but it has been extended once already.
Fonorola has rejected Call-Net's offer and has been looking for another partner. Fonorola Thursday said the law firm McCarthy Tetrault "has been engaged to represent a non-Canadian publicly traded company in connection with a proposed acquisition of shares of Fonorola." Fonorola said McCarthy Tetrault has requested that the regulators refuse Call-Net's challenge to the poison pill. The identity of the company mulling a competing bid wasn't disclosed.
Poison-pill plans generally give shareholders the right to purchase common stock at a steep discount in the event of an acquisition or an attempt to acquire a certain stake. Poison pills make hostile bids prohibitively expensive because they trigger the issuance of huge amounts of stock in the event of a bid, thus making it much more expensive for a suitor to buy enough shares to acquire control of the company.
Fonorola has set up centers in Montreal and New York to meet with any parties interested in proposing alternative transactions. Fonorola has said it received "expressions of interest" from other companies before Call-Net made its offer, adding that those contacts were "friendly conversations."
Call-Net's offer for Fonorola is the first big move in what is expected to be a long-running shake-up of the Canadian telecom industry as regulatory barriers come down and companies jostle for market share, analysts have said.
A combined Call-Net and Fonorola would create Canada's fourth-largest telephone company after Bell Canada, BC Telecom Inc. and Telus Corp. The three companies formerly held monopolies on phone service in, respectively, Ontario, British Columbia and Alberta, but Canadian regulators have opened competition in the cable-TV and long-distance and local phone markets.
Investors have bid up the price of Fonorola's shares above Call-Net's offer, betting that rival bids will emerge. BCE Corp. has been mentioned by some analysts as a possible bidder, but BCE has declined to omment.
Call-Net, based in Toronto, provides long-distance service under the Sprint Canada brand name mainly to residences and small to medium-size businesses. It has also said it intends to enter the local telephone market. Call-Net is 25%-owned by Sprint Corp. of Kansas City, Mo.
If it acquires Montreal-based Fonorola, Call-Net would broaden its customer base to include large businesses and smaller long-distance resellers and gain an advanced fiber-optic network that extends across Canada and into the U.S. |
