Sirois' dilemma: does two go into one?
Microcell, Look
Kathryn Leger
Financial Post
MONTREAL - Montreal wireless multi-millionaire Charles Sirois is walking a fine line these days as he considers whether or not to merge Microcell Telecommunications Inc. with cash-needy Look Communications Inc.
Mr. Sirois, who controls 60.8% of Microcell through his privately held Telesystem Ltd., also has a 55% voting stake in Look.
Analysts said yesterday while there are advantages to combining Microcell with Look, Mr. Sirois' dilemma is that such a move could be prejudicial both to Microcell and Look shareholders.
"The issue is that Look is financially distressed," said one analyst, requesting anonymity. "Microcell management realize they would put a lot of negative pressure on their stock price because probably the general view is that Look could go bankrupt at some point. So why rescue unless you are going to pay next to nothing for it. And can Sirois really disappoint Look shareholders that way?"
Mr. Sirois' stake in Look is through a numbered company that is owned by Teleglobe Inc. and Telesystem but controlled by Telesystem.
Analysts estimate that Look will need a minimum of $200-million to $300-million by the end of next year for development. BCE Inc., in the process of taking over Teleglobe, had a loan to Look from Teleglobe, also previously controlled by Sirois, cut off because it is a competitor. Look has since said it has bank financing till early next year but its business is capital intensive.
"Look has a very speculative technology and it hasn't done particularly well with adding subscribers in its core business of digital television service and it is having trouble getting funding for itself," one analyst said. "They tried to do an equity issue in March and couldn't and they couldn't do one now."
"It's all a question of price," said another market observer who follows Microcell. "But Mr. Sirois has to consider the independent shareholders of Microcell."
Some argue that the there are several ways a merger could benefit the two companies.
Microcell has spent substantial amounts building up its Fido brand name for wireless telephone services, and the costs of that could be spread over to Look, which is now in effect competing under another brand name. The two could also bundle packages of wireless telephone service with digital TV and Look's high-speed Internet access and Web-related services.
kleger@nationalpost.com |
