BCE Tumbles to 12-Year Low After $3.6 Billion Ziply Deal

Derek Decloet and Christine Dobby
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(Bloomberg) -- BCE Inc. will pause dividend growth next year as it makes an unexpected push into the US with the purchase of an internet provider in the Pacific Northwest, a move that sent the company’s shares tumbling to a 12-year low.

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Canada’s largest telecommunications company will pay C$5 billion ($3.6 billion) for Northwest Fiber LLC, which does business as Ziply Fiber and has 1.3 million locations in Washington, Oregon, Idaho and Montana, with plans to expand to more than 3 million in the next four years, according to a statement Monday.

The announcement comes less than two months after BCE unveiled a deal to sell its stake in Maple Leaf Sports & Entertainment Ltd. to Rogers Communications Inc. for C$4.7 billion. BCE said at the time that transaction would help reduce its debt, an issue credit agencies and analysts had flagged as a problem in recent months.

But BCE now says it will use those proceeds, an expected net amount of C$4.2 billion, to fund most of the Northwest Fiber deal. The company also ruled out increasing its dividend for all of 2025 — after 16 years of boosting its payout annually — and said it will raise fresh equity through a discount on its dividend reinvestment plan, also known as a DRIP.

The plan to halt dividend increases, a key part of the investment thesis for shareholders in Canada’s large telecom companies, sent BCE’s stock plunging the most in more than four years. The shares dropped 9.7% to close at C$40.47 in Toronto, the lowest closing price since May 2012.

Chief Executive Officer Mirko Bibic said the company didn’t decide to acquire Ziply “based on an assessment of one day’s stock market reaction,” and noted that sell-side analysts had been speculating for some time that the company would pause dividend growth and introduce a DRIP discount to shore up its capital position.

“We’re managing this for the long term,” he said in an interview, adding that “pursuing a fiber growth agenda is right on strategy and core to what BCE does really well.”

Talks with the management team at Northwest Fiber, which is owned by Searchlight Capital in partnership with three Canadian pension funds, only began in late September, after the MLSE transaction was announced, Bibic said.

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