The stock market appears to be pricing BCE with increased risk.
Let’s review. The deal from Ontario Teachers Pension Plan will provide shareholders with $42.75 per share. There are likely 2 dividends to be received between now and closing, for a total of another 65 cents. Assuming the deal is finalized in April, each share is worth $43.40.
As recently as a couple weeks ago, BCE traded for a little over $41.20. Right now, it is around $39.40. If the deal goes through, investors would make $4, a little over 10% in about 5 months, for a current yield of around 25%.
Does the recent drop mean that more investor sentiment is questioning whether the privatization will actually close?
Update [November 26, 5:00 pm]
Barron’s today agreed with the view that Bell is an interesting arbitrage opportunity.
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