BCE Expands Into the U.S. Fiber Market With Ziply Fiber Acquisition
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BCE Inc.’s BCE subsidiary Bell Canada recently inked a definitive agreement to acquire Ziply Fiber, a premium fiber Internet provider in the Pacific Northwest United States, to boost its North American fiber footprint and unlock new opportunities in the U.S. broadband market.
The deal, valued at nearly C$7 billion, including C$5 billion in cash and the assumption of around C$2 billion in net debt at the close of the transaction, is anticipated to be settled in the second half of 2025, pending regulatory approvals. Upon the deal closure, Ziply Fiber will continue to run as a separate business unit under Bell, headquartered in Kirkland, WA.
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The initiative positions BCE for higher growth and diversification by strengthening its foothold in the vast, underserved U.S. fiber market. Post the acquisition deal settlement, Ziply Fiber will offer BCE access to a significant customer base and expansion potential. Since Ziply’s formation in 2020, it has grown rapidly, expanding its fiber footprint across four U.S. states.
With over 1.3 million locations already connected, Ziply plans to reach more than 3 million locations within the next four years. This will aid BCE’s goal of reaching more than 12 million fiber locations across North America by the end of 2028, solidifying its position as the third-largest fiber Internet provider in the region.
Synergies stemming from the buyout are expected to provide substantial benefits to customers across Canada and the United States. The joined forces are likely to address the rapid demand for high-speed, reliable Internet services by leveraging their technological expertise and product innovation. The acquisition values Ziply Fiber based on an enterprise value metric of 14.3 times its 2025 estimated adjusted EBITDA, which includes run-rate synergies.
BCE’s Buyout Funding Strategy
The acquisition cost of C$5 billion in cash will largely be funded through proceeds from BCE’s sale of its stake in Maple Leaf Sports & Entertainment (“MLSE”). In September 2024, BCE finalized an agreement to sell its ownership stake in MLSE to Rogers Communications Inc. for C$4.7 billion. The deal, subject to regulatory approval, is anticipated to close in mid-2025.
Almost C$4.2 billion of the acquisition's cash element will come from BCE’s divestiture of MLSE, with the remaining funds sourced through a discounted Dividend Reinvestment and Stock Purchase Plan (DRP). BCE has secured a $3.7 billion delayed-draw term loan facility as backup financing to ensure the acquisition progresses smoothly in case the MLSE divestiture closes after the Ziply transaction. Upon completion of this acquisition and other pending divestitures, including Northwestel and BCE’s ownership stake in MLSE, its leverage ratio is expected to remain stable. This financial planning aligns with BCE’s commitment to maintaining investment-grade credit ratings and a prudent long-term debt management strategy.
To support shareholder value, BCE has confirmed maintaining its annual common share dividend at C$3.99 per share through 2025. However, with this significant acquisition, BCE plans to pause any dividend growth until its dividend payout and net debt leverage ratios align with its target ranges.
To further bolster its financial position, BCE is amending its DRP. This amendment will allow the issuance of new shares from BCE’s treasury at a 2% discount to the average market price. By encouraging shareholders to reinvest dividends in BCE stock, this approach aims to retain cash for strategic initiatives and provide BCE with the financial flexibility needed to support this acquisition. This plan offers participating shareholders an opportunity to acquire additional BCE shares without incurring any commission or brokerage fees, thus maximizing shareholders’ value. The DRP amendment is currently subject to final terms and approval by the Toronto Stock Exchange.