01:45 PM EST, 11/04/2024 (MT Newswires) -- Bell said Monday it will acquire 100% of U.S.-based Ziply Fiber for $5 billion (US$3.65 billion) in cash. The transaction, which will require regulatory approval including FCC consent and various state approvals, is expected to close in the second half of next year, notes National Bank.

The transaction will be partly funded by the $4.2 billion net proceeds Bell expects to receive from the sale of its ownership in MLSE.

The company also intends to maintain its $3.99 dividend per share through 2025 and pause dividend growth until its payout ratio and net debt leverage ratios are tracking towards target policy ranges.

"The news of a U.S. acquisition comes as a surprise and at a time when Bell is underperforming its domestic peers," writes National Bank analyst Adam Shine. Although said to be within the context of peer transactions valued in a range of 19x-25x, the U.S. purchase still looks expensive and brings with it concerns amid competitive dynamics playing out south of the border, Shine notes. It should also not be ignored that the acquisition comes at a time when competitive moves and related pressures in Canada have undermined growth and sector valuations, Shine adds.

Shine expects BCE shares to remain under pressure for the next several quarters.

National Bank has a target of $48 and a Sector Perform rating on BCE.

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