Back in May, Telus first announced its intention to make an unsolicited all-cash takeover bid for Microcell. Telus had planned to purchase all the outstanding publicly traded shares and warrants of Microcell, and the total equity value of the transaction was about CAD 1.1 billion ($843 million).
However Telus has now been forced to extend the offer for a third time after Microcell investors held out for a higher offer. The bid, which was to expire at 9pm (Toronto time) on 20 August, was extended to September 20.
Telus is Canada’s second largest telecoms company and is keen to challenge rival Bell Canada’s hold on the eastern half of the country. The acquisition of Microcell, Canada’s number four mobile-phone carrier and the operator of the popular Fido wireless service, would make Telus the largest provider of mobile phone services in Canada.
A merger would also reduce the market from four major wireless players to three. Microcell is the smallest competitor in Canada’s mobile phone industry, ranking behind Bell Mobility (part of Bell Enterprise Group), Rogers Wireless (part of Rogers Communications Inc.), and Telus Mobility.
The combination of the wireless businesses of Microcell with Telus would create an entity with an estimated 4.76 million customers, compared to Bell Mobility’s 4.5 million and Rogers’ 3.84 million.
Microcell has a troubled past and at the beginning of May emerged from court-ordered creditor protection, after it had to restructure after being forced into bankruptcy protection. Its creditors converted about CAD 1.7 billion ($1.3 billion) of debt into equity to keep the company afloat.
Given that Telus’s bid has now been outstanding for almost three months, and still no competing offer has emerged, it is therefore irrational for the trading price of Microcell securities to trade above the offer price, Telus CFO Robert McFarlane told a conference call in early August.
Microcell’s board in May had recommended that shareholders reject the offer, saying it was too low and another bidder might make a higher offer.
