Financial Challenges

Chapter 6
New Offering of BCE Equity

BCE is Canada’s largest communications company. BCE shares are traded in Canada, the United States, and Europe. In 2002, BCE decided to raise $5 billion of new funds. In the previous chapter we discussed the company’s debt issue. The equity issue that took place at the same time as the debt issue raised net proceeds of $2,078 million by the sale of 85 million BCE common shares at a price of $24.45 per share. The funds were used to pay part of the acquisition price of SBC Communications’ minority interest in Bell Canada. As a result of the debt and equity issues, BCE was able to buy back the part of Bell Canada that it did not own. Thus, it again has full ownership of Bell Canada.

BCE has 24 million customer connections through the wireline, wireless, data/Internet, and satellite services that it provides. In addition, it has extensive content capabilities through Bell Globemedia, The Globe and Mail newspaper, CTV, and Sympatico, an Internet portal. It also has e-commerce capabilities under the BCE Emergis brand.

What is the value of this diversified company’s common shares? The valuation of common shares is a challenging undertaking, not just for individual investors, but also for professional investment dealers/investment bankers who underwrite share offerings such as the BCE issue discussed above. In this chapter, the principles and tools used in the valuation of common shares are discussed.

Back to Financial Challenges