After months of fighting to see who would win the battle to take BCE private, the Ontario Teachers’ Pension Plan has emerged victorious, beating a consortium led by the Canada Pension Plan Investment Board and another group led by private equity firm Cerberus Capital Management. Teachers’, Providence Equity Partners and Madison Dearborn Partners agreed to buy the telecom company for $51.7 billion, including $16.9 billion in debt.

Concerns over BCE being partially owned by a pension fund seem to be non-existent in the industry. “They just want the best return for their investment, and if taking a company private is the best way for them to get the best return on their investment—obviously keeping in mind their fiduciary responsibility to their stakeholders, their beneficiaries—I don’t necessarily see anything wrong from that regard,” says Paul Malizia, the head of Hewitt Associates’ investment consulting practice in Canada.

Steve Bonnar, a principal with Towers Perrin, agrees. “They’re quite an established private equity holder,” he says. “Nobody questions the same kind of thing with Maple Leaf Sports and Entertainment.”

For pension plans, finding a suitable replacement in their portfolio once the acquisition of BCE closes in the first quarter of next year might not be a major issue as many pension funds are reducing their Canadian equity holdings anyway. According to the Pension Investment Association of Canada, the asset mix of plans of sponsor organizations represented by plan members was dedicated to 19.9% in Canadian equities at the end of 2006. That’s down from 26.5% five years ago and 33% in 1996.

Also, Bonnar explains, the Canadian equity market doesn’t necessarily reflect the Canadian economy and hasn’t for an extended period of time. It’s hasn’t reflected the Big Three automakers or IBM in Canada because they’re subsidiaries. “With the taking out of Falconbridge, Inco, Alcan [and] BCE now—and I’m sure there will be others—yes, it will sort of exacerbate the skewing of the Canadian equity market, but that’s basically the strengthening of the argument for global diversification.”

As a result of this so-called “hollowing out” of the Canadian marketplace, equity managers will need to start looking in a more North American or global context, says Malizia. They will also have to start moving down the capitalization spectrum and look at more mid- and small-cap stocks in terms of potential investments. “It’s an issue, as we’ve said, that’s been going on in the marketplace for a while, and I think it’s an issue that will continue to have prevalence in the Canadian marketplace.”

For more about the BCE deal, go to

BCE Chronology

June 30: BCE reaches agreement to be acquired by investor group led by the Ontario Teachers’ Pension Plan, Providence Equity Partners and Madison Dearborn Partners.

June 29: BCE reviews proposals.

June 26: The Caisse de dépôt et placement du Québec drops out of the Canada Pension Plan Investment Board-led consortium; Telus announces it has dropped out of the race.

June 21: Telus enters discussions to acquire BCE .

June 5: Teachers’ forms its own consortium, which includes Providence, and enters into discussions to take BCE private.

May 23: Private equity firm Cerberus enters privatization talks with BCE .

April 17: BCE announces it has begun talking to a consortium that includes the CPPIB , the Caisse, the Public Sector Pension Investment Board and Kohlberg Kravis Roberts & Co. regarding privatization.

April 9: In a filing with the Securities and Exchange Commission, Teachers’ says it is considering its options with BCE and also discloses that it owns 5.3% of the company, making it the largest shareholder.

A head for business

The human resources(HR)department is heading for more change, if it hasn’t changed already. According to Mercer Human Resource Consulting’s 2006 Global HR Transformation Study, 50% of the roughly 1,400 HR leaders surveyed said they were presently in the middle of a transformation, 12% had completed a transformation within the past year, and 10% planned to begin one within the next year.

The first HR transformation(which got under way about 10 years ago)largely focused on operational responsibilities and delivery of HR services. But this second transformation is heading in a different direction.

“It’s about focusing on business needs,” says Angela Horton, an associate in the human capital practice with Mercer in Vancouver. “To put that into real terms, we’ve got issues with an aging workforce. In five years, most of those people are going to be retiring. There might be jobs where it takes 10 years to get someone to a competent level to performing in those roles. And if [organizations] are not taking measures to ensure that they have trained employees now, it’s going to be to their detriment for sure.”

Although 67% of those surveyed in the 2006 study said HR is seen as a “strategic partner,” that’s not truly reflective of where HR focuses its time. The survey indicated that delivering HR services(29%)and transacting/record keeping(27%)outweighed strategic partnering(15%).

Over the next three to five years, Horton says upgrading HR employees’ skills will be critical in terms of HR’s focus. “A lot of HR employees are very brilliant at administrative tasks. They’ve got great interpersonal skills; [they’re] very organized,” she says. “[But] we need people to be thinking more business-focused.” —Brooke Smith

Age-old Story

If people are the backbone of an organization, what happens when the “backbone” breaks? In Canada, the bulk of that backbone is the baby boomers. According to the 2006 Census by Statistics Canada(Statscan), working Canadians aged 55 to 64 totalled 3.7 million in 2006, the highest number ever for that age group. But with many of these boomers set to retire in the next five to 10 years, employers will be left facing labour shortages. In fact, Statscan predicts that by 2016, there will no longer be enough new workers to replace retirees.

Companies, of course, will have to play their part in retaining older employees. “Employers need to consider the type of work and how to arrange that work to be done,” says Laura Williams, a senior benefits consultant with Hewitt Associates in Vancouver. For example, Williams asks, does an employee have aging parents to care for or grandchildren she wants to spend time with? Companies will need to consider flexible work arrangements, such as working three months of the year on a special project or working 60% of each week, says Williams.

But change doesn’t stop with work arrangements. Employers will have to rethink their benefits plans, too. In its Rapid Response Survey on post-65 benefits, Hewitt asked respondents if their organization has extended any benefits for active employees age 65 or older. Twenty-six per cent said they are making changes to their medical and dental benefits, and of that 26%, only 10% are doing so with age or benefits restrictions. —Brooke Smith


Benefits Canada Cover Wins Gold

The Benefits Canada team took home Gold in the Best Cover category at this year’s Kenneth R. Wilson Awards, which honour the best of business press publishing. The winning cover was “Distress Signals” from our July 2006 issue. Leigh Doyle also received a top-five mention in the Profile of a Company category for her June 2006 article, “Juggling Act,” which looked at the benefits administration of Cirque du Soleil. Our sister publication, Canadian Investment Review, earned silver in the Best Cover category for the Winter 2006 “A Fresh Start” issue.



In “Mind Games” [July 2007], Gail Rieschi’s name was misspelled. Benefits Canada regrets the error.



For a PDF version of this article, click here.

© Copyright 2007 Rogers Publishing Ltd. This article first appeared in the August 2007 edition of BENEFITS CANADA magazine.