Toronto (Ontario) January 26, 2000 - BCE Inc. today announced a plan to distribute an
approximate 37% interest in Nortel Networks to the nearly 500,000 shareholders of BCE. As a
result of this plan, all current BCE common shareholders will own two securities, have a direct
interest in both BCE and Nortel Networks separately, and thus continue to benefit from their
ownership in two Canadian high-tech powerhouses.
"The distribution of the Nortel Networks shares will begin to unlock significant and sustainable
value for BCE shareholders," explained Jean C. Monty, President and CEO of BCE. "Nortel
Networks' stellar performance has overshadowed the underlying value of BCE's other assets. In
recent months, BCE's stock has been trading significantly below the underlying value of its assets
with an estimated discount exceeding $30 billion - the equivalent of approximately $47 per share -
which is not being recognized by the financial markets. This transaction will allow the market to
more accurately reflect the value of BCE's communications services business consisting of Bell
Canada (including Bell Mobility), BCE Emergis, CGI, BCE Media (including Bell ExpressVu and
Telesat Canada) and Bell Canada International. With a market valuation that more accurately
reflects our true value, we can further grow and expand these businesses in a more cost effective
manner for our shareholders, by using our shares as currency for acquisitions."
"We enthusiastically support the proposed plan and believe this is a win-win for all Nortel
Networks shareholders," said John Roth, President and CEO, Nortel Networks. "It will put us on
an equal footing with our peers in that our ownership and stock will be widely held. This will make
Nortel Networks even stronger, unleashing us as a truly independent, Canadian-based global
company focused squarely on the growth engines of the Internet."
BCE and Nortel Networks have signed a definitive agreement, which both Boards of Directors
have approved, to implement the proposed transaction by way of a plan of arrangement. Under the
proposed plan, BCE common shareholders will, for each common share of BCE held, receive
approximately .78 of a common share of a new publicly traded Canadian company that will own
all of the shares of and continue as Nortel Networks. (The final ratio is subject to adjustment,
based on the number of BCE common shares outstanding at the time of completion of the
transaction.) As part of the plan, all Nortel Networks common shareholders will exchange their
current shares of Nortel Networks for common shares of the new company. The exchange will be
on a one-for-one basis, so that the shareholders of BCE and the public shareholders of Nortel
Networks will together own the common shares of the new public company. Each BCE
shareholder will retain the same number of BCE common shares, which will now reflect the
remaining interests of BCE's communications services. For example, a shareholder with 100 BCE
common shares prior to this transaction will hold 100 BCE common shares and approximately 78
Nortel Networks common shares following the transaction. In aggregate, shareholders will receive
an annual common dividend totaling $1.37 per share, $1.20 from BCE and approximately $0.17
(U.S. $0.12) from Nortel Networks.
Following this transaction, BCE will retain an approximate 2% interest in Nortel Networks that will
be available to fund further growth.
"This plan is consistent with BCE's vision to be a leader in providing our customers with a full range
of communications, information, e-commerce and entertainment services," Mr Monty added. "Our
focus over the past two years has been on building the scope of our operations, particularly the
creation of major growth engines such as BCE Emergis and Bell Nexxia, and moving towards a
more integrated operating model. Building on our strong continuing base in Canada, we are now
positioned to accelerate our growth through the expansion of communications services beyond
Canada in selected growth areas. We will continue to build Bell Canada into a truly national
communications company and we will intensify our focus on the Internet in all our businesses
particularly with Bell Sympatico and BCE Emergis."
Today's announcement is a natural result of the evolution of Nortel Networks and BCE. Over the
years, BCE's ownership in Nortel Networks has declined from 100% to 39%. Today, there is no
longer a strong business rationale for BCE to maintain a significant ownership in Nortel Networks.
"BCE is proud to have been instrumental in the development of Nortel Networks into Canada's
premier global high-tech leader. As we go forward, we are totally committed to support the
development of other BCE companies as we pursue the tremendous growth opportunities
presented by the new Internet economy," concluded Mr. Monty.
The transaction will be subject to customary conditions, including relevant tax rulings, and approval
of the plan of arrangement by the court and the common shareholders of BCE and Nortel
Networks. BCE expects the new structure to be in place by the end of the second quarter of
2000. Morgan Stanley Dean Witter is acting as financial advisor to BCE and has provided a
fairness opinion to the corporation.
BCE has received confirmation from bond rating agencies, including CBRS, DBRS, and Standard
& Poor, that current credit ratings will be maintained.
In accordance with Canadian tax law, the plan will be executed in a manner that does not result in
any taxes to BCE or to its Canadian shareholders, unless they sell the shares being distributed, in
which case normal capital gains taxes would apply. The cost basis of the current BCE shares held
by Canadian shareholders will be proportionately split based on the relative values of BCE and
Nortel Networks following the distribution. For U.S. shareholders, this transaction will be treated
as a taxable dividend according to U.S. tax laws. U.S. shareholders are urged to consult their tax
or financial advisors in this regard.
BCE will continue to be one of Canada's largest companies with revenue exceeding $16 billion,
assets of approximately $30 billion and an estimated market value that would rank among the top
Canadian companies. Through its operations, BCE provides residence and business customers in
Canada with wireline and wireless telecommunications products and applications, satellite
communications and direct-to-home television services, systems integration expertise, electronic
commerce solutions, Internet access and high-speed data services, and directories. BCE has a
presence abroad through Bell Canada International, which provides communications services to an
nearly 6 million customers in Asia and Latin America, and through Teleglobe, an international
telecommunications carrier. BCE shares are listed in Canada, the United States and Europe. |
