With its C$670 million ($585 million) bid for Glentel Inc., Canadian communications giant BCE Inc. is paying a steep premium to roll up mobile device distribution in its home country.
The takeout price of C$26.50 per share in cash and stock is more than 100% above Glentel's prior close, and values the target's equity at C$594 million. Glentel also has C$78 million in net debt and minority interests.
Shares of Burnaby, BC-based Glentel gained C$13.27, or about 104%, to C$26.02 in Friday morning trading. BCE stock rose 8 cents, or close to 0.2%, to C$47.12. Shares were down earlier on Friday.
"The valuation metrics are very high," said Macquarie Capital analyst Greg MacDonald, who values the deal at 9.6 times Glentel's projected 2015 Ebitda.
BCE chief executive George Cope said in a statement that strengthening distribution channels would accelerate its wireless growth. Glentel operates close to 500 stores in Canada that sell devices from multiple carriers. The company also has more than 700 stores in the U.S. and close to 150 million in Australia and the Philippines.
Montreal-based BCE is a powerhouse, combining telecommunications, pay television systems, TV programming, entertainment and professional sports assets.
BCE, Rodgers Communications Inc. and Telus Corp. form a "big three" that dominates Canadian wireless. Smaller carriers such as Wind Mobile and Mobilicity, which is formally known as Data & Audio-Visual Enterprises Holdings Inc., have become distant fourth-place competitors.
"One might question whether these carriers need more distribution channels to drive further growth," Macquarie analyst MacDonald said regarding BCE's purchase of Glentel.