Bell Canada’s stock fell to a low not seen since 2012 after announcing the acquisition of an American internet provider for $5 billion.
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The stock tumbled 9.7% on Monday, returning to its spring 2012 price. Tuesday afternoon, it continued its descent, losing 1.4% more and closing below the $40 mark.
Bell will acquire Ziply Fiber, a company present in four states in the American Northwest, which will allow it to add 1.3 million locations connected to optical fiber to its network.
To finance this ambitious transaction, Bell will use $4.2 billion of funds from the recent sale of its stake in MLSE, the parent company of Toronto’s major professional sports teams, suspend the growth of its dividend and issue new shares.
Mirko Bibic, CEO of Bell Canada Enterprises.
Photo BCE
“Perplexed”
“Investors in Canadian telecommunications companies are in this sector for dividends and not for growth,” Scotia analyst Maher Yaghi sharply reacted in a note, saying he was “perplexed.”
His colleague Jérôme Dubreuil from Desjardins was also skeptical, dropping his target price for Bell from $51 to $45.
Rating agencies Moody’s and Standard & Poor’s (S&P), however, indicated that the acquisition would not have an immediate impact on Bell’s credit ratings.
According to S&P, Ziply “will provide Bell with a better growth avenue than the Canadian market.”
Remember that at the end of the summer, Moody’s and S&P both lowered the Montreal company’s credit ratings to the lowest level in the investment grade category.
