With onerous lawsuits seeking as much as $1.2 billion looming over the failed buyout of Bell Canada (BCE), four of the firm's directors including its chairman announced Thursday that they will leave the board.
The four exiting directors are: Richard J. Currie, chairman, and Judith Maxwell, John H McArthur, and Robert C. Pozen. Another director, Thomas C. O'Neill, will be designated new chairman, according to BCE. O'Neill has been chairman of the firm's audit committee for seven years.
The board changes follow the collapse of the planned multibillion-dollar buyout -- Fortune Magazine called it "The Biggest Deal Ever" -- and a group of private equity funds, banks, and pension funds are lining up to sort out breakup fees. The deal got under way last spring when the world's financial markets were still relatively stable, but as the worldwide meltdown in financial markets spread, the participants began to question whether enough funding could be raised to underwrite the privatization of Bell Canada, the largest telecommunications company in Canada.
"The fact that the transaction to sell the Company to an investor group led by Teachers' Private Equity will not proceed is obviously a disappointment for shareholders, including the tens of thousands of BCE employees and retirees who have invested in the Company over many years," Currie said in a statement.
The buyout group of investors was led by the Ontario Teachers Pension Plan and backed by prominent U.S. buyout firms including Providence Equity Partners, Madison Dearborn Partners, and Merrill Lunch Global Private Equity. A group of large banks, including Citigroup, was initially prepared to support the deal, but balked as financial markets headed south.
McArthur and Pozen are prominent figures in U.S. financial and investment circles. McArthur, a native of Vancouver, was a longtime dean of faculty at the Harvard Graduate School of Business Administration and has been a director of several U.S. and Canadian firms. Pozen held top positions at the Boston-based Fidelity Investments and has been a visiting professor at Harvard Law School. He gained widespread recognition earlier in the decade for his effort to revise the U.S. Social Security system.
When it entered into buyout negotiations last spring, Bell Canada seemed to have dodged the bullet that hit the breakup more than two decades before of the old AT&T. That split was eventually pieced together again with two major survivors emerging, the new AT&T and Verizon Communications. But, just as the Bell Canada buyout looked like a perfect deal, the global credit crunch began.
Now, Bell Canada believes it is owed a substantial breakup fee; the buyout consortium is challenging that argument.