BCE trades up on deal rumors; Nutraceutical investor makes $117.72 million takeover bid

By Cristal Cody

Tupelo, Miss., Aug. 19 - Trading volume in BCE, Inc. continued to rise on speculation the company could be in proposal talks with Telus Corp., an analyst said Wednesday.

In other deals, Nutraceutical International Corp. had no immediate comment on a shareholder's $10.75-a-share cash buyout offer announced Wednesday.

Meanwhile, stocks managed a rally on reports of falling oil reserves and potential higher energy demand on Wednesday.

In fact, that could be part of the catalyst for a bull cycle ahead, John Merrill, chief investment officer of Tanglewood Wealth Management, Inc., said in an interview Wednesday with Prospect News.

"There's more positives than negatives pushing the market today," Merrill said.

The Dow Jones Industrial Average added 61.22 points, or 0.66%, to close at 9,279.16.

The Standard & Poor's 500 index rose 6.79 points, or 0.69%, to 996.46, while the Nasdaq Composite index closed up 13.32 points, or 0.68%, at 1,969.24.

"We're going to have to increase production just to keep inventories from going to zero, so that sets us up for a better economy," Merrill said. "So things are in place over the next few months to create surprises [in the market]."

BCE painted as deal target

Shares of Verdun, Quebec-based BCE, Canada's largest communications business, are up on rumors the company might be talking to Vancouver, B.C.-based Telus, Western Canada's largest telecommunications firm, about a deal.

BCE shares closed up C$0.22, or 0.93%, at C$23.98 on Wednesday. Trading volume in the company has nearly doubled since July 31, according to market data.

"We believe that a merger between Telus and BCE makes strategic sense, although it is difficult to predict the timing of any potential transaction," Christie Main Groves, an analyst with Pali International Ltd., said Wednesday in a research note.

Telus spokesman Shawn Hall said Wednesday that the company had no comment on the deal speculation.

BCE representatives were not immediately available for comment.

On Aug. 13, Telus filed a preliminary short-form base shelf prospectus in Canada and a registration statement in the United States with securities regulators to allow it to offer up to C$4 billion of debt, equity and/or warrants during a 25-month period.

Telus and BCE discussed a merger in 2007 when BCE put itself up for sale, but Telus backed out of the process. BCE's planned C$51.70 billion leveraged buyout by the Ontario Teachers Pension Plan went bust in December 2008 after BCE failed a solvency test as required under the deal.

The Canada Competition Bureau likely would scrutinize a merger between BCE and Telus because it would combine the country's No. 2 and No. 3 wireless providers, Groves said.

"Competition issues are likely, but could be mitigated by the presence of a strong competitor and new wireless entrants," Groves said. "Management could be a significant hurdle to a transaction. However, there are several common shareholders between Telus and BCE who we believe could put pressure on the two boards to reach agreement. We believe that Telus can realize significant synergies in a bid for BCE."

Shares of Telus rose C$0.02, or 0.06%, to end Wednesday at C$33.30.

Vitamin mogul wants back in game

Also on Wednesday, Nutraceutical shareholder Ryan Drexler offered $10.75 a share in cash to acquire the vitamin supplements company but hinted that he might offer more.

The current bid is valued at $117.72 million, based on the company's 10.92 million shares outstanding.

Drexler, who holds 3.10% of outstanding shares of Nutraceutical, said Wednesday in a statement that the company is underperforming and in need of management direction.

Nutraceutical representatives did not return a message for comment on Wednesday.

Drexler, who sold his family business, Country Life Vitamins, to Kikkoman Corp. in 2007, said in a statement Wednesday that he twice approached Nutraceutical with a proposal in July but was rejected.

Park City, Utah-based Nutraceutical, which manufactures supplement brands that include Solaray and Nature's Life, said in letters to Drexler, which he released publicly, that the company is not for sale.

In a letter sent to the board on Tuesday, Drexler said the price "could possibly be increased following completion of due diligence."

Nutraceutical's stock rose as high as $10.90 on Wednesday before shares closed unchanged at $10.70. The stock has traded from $5.59 to $12.99 over the past year.

Mentioned in this article:

BCE, Inc. Toronto: BCE

Nutraceutical International Corp. Nasdaq: NUTR

Telus Corp. Toronto: T

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