MONTREAL – A court victory yesterday by bondholders in Canada’s largest telephone company, BCE Inc., came as an unexpected blow to the takeover plans of an investor group led by the Ontario Teachers’ Pension Plan and Providence Equity Partners Inc.

The $48.9 billion offer – considered the largest leveraged-buyout bid in history – was approved by BCE shareholders in September. The takeover plan had been approved by Quebec Superior Court and had received conditional approval from Canadian Industry Minister Jim Prentice, BCE said last month. (READ MORE)

But in its unanimous decision yesterday, Quebec’s Court of Appeal decided the telephone company’s effort to obtain the best value for its shareholders “cannot be considered in isolation from other factors,” the chief justice wrote, according to Bloomberg News.

The bondholders – including CIBC Global Asset Management Inc. – argue that the takeover would dangerously increase BCE’s debt load, putting the phone company at risk of default. The Ontario Teachers’ plan intended to finance the deal with about $34 billion Canadian in debt, regulatory filings show.

“The probability of the deal closing at $42.75 [Canadian] a share on June 30 is almost zero,” Craig MacAdam, who helps manage about $3 billion as a portfolio manager at Aurion Capital in Toronto, told Bloomberg News. “But there’s still room to maneuver. The deal is not completely dead yet. All the stakeholders will have to get back to the table and renegotiate.”

Montreal-based BCE and its prospective buyers said they plan to appeal the decision to Canada’s Supreme Court. “Our team is hunkered down reviewing the ruling and evaluating our options,” Ontario Teachers’ spokeswoman Deborah Allan said in a telephone interview with Bloomberg News. “We remain committed to this transaction.”

Providence Equity, Madison Dearborn and BCE didn’t immediately return phone calls seeking additional comment.

Also today, India’s Idea Cellular Ltd. – India’s No. 6 wireless telecom firm and a part of diversified conglomerate Aditya Birla Group – said that Providence Equity Partners has agreed to invest $640 million in the company’s Aditya Birla Telecom. The deal is expected to close by August, according to Private Equity Hub.

“This commitment will bolster our position as a leading telecom player in India,” said Sanjeev Aga, Idea’s managing director. “We share a relationship of trust with Providence [Equity], which has facilitated putting through a large transaction in next to no time.” Providence Equity also had invested $400 million in a pre-IPO placement in Idea Cellular.

“We are pleased with our successful partnership with Idea and look forward to extending that relationship to this important investment in the future of India’s mobile communications sector,” Biswajit Subramanian, managing director of Providence Equity Advisors India, said in a midday statement today. “The Idea management team is proven and respected, and we look forward to supporting their success at ABTL.”

Providence Equity Partners Inc. is a global private investment firm based in Providence with offices in New York City, Los Angeles, London, Hong Kong and New Delhi that specializes in media, entertainment, communications and information companies. It has raised $21 billion through seven funds since its founding in 1989. Additional information is available at www.provequity.com.