BCE Termination Fee

BCE (BCE) finally reached the drop dead date when the deal was supposed to close but did not. They are now fighting to collect the CDN$1.2 Billion fee from Ontario Teacher, Providence Equity Partners, and Madison Dearborn Equity Partners. The BCE year end is Dec 31 which is just a few weeks away. So the question becomes do they include it as a receivable on the balance sheet as well as record it as extraordinary profit. Will the auditor allow the entry on the year end statements. Will executives get bonuses based on profits that may not be real? Where does Teachers stand in all of this? Officially the pension plan was making the offer through a private equity vehicle. But any way you want to cut it, does the pension plan have any pockets with about $1.2 billion dollars that it does not need. Most pension plans do not.

Teachers and associates issued this press release

“BCE Acquisition Inc. ("Purchaser") issued the following statement in response to today's demand by BCE Inc. (TSX, NYSE: BCE) that the Purchaser pay BCE a C$1.2 billion termination fee due to the failure of the privatization transaction to close. "It is most unfortunate that BCE is threatening litigation over the failure of a mutual closing condition that the company insisted be included in the original acquisition agreement. It is very clear that neither party has a right to a termination fee in these circumstances. Should BCE commence such baseless litigation, we are confident that it would not succeed."

Progressive Excess Bond Reliance

Progressive Corporation (PGR) announced Nov numbers. The press release was a masterful executive summary of all the good stuff. Readers are invited to click onto a deeper PDF document that has more stuff to read. The salient issue that they dance around was the decision to incur a gain of approximately $100 million on their bond portfolio. The gain is approximately a 225% increase over the comparable period last year. Essentially this means it’s a one shot deal.

What management neglects to comment on is that the bond gains are 73% of net income. Last year for the comparable period the gains only constituted 33% of net income. This is radically different and management is ignoring the point entirely.

Fedex Fubar

Fedex (FDX) slashed their earnings guidance and the shares drop dramatically. Approximately 13% by mid day. A month ago management was gamely saying all is relatively well and they expect growth. Now they have reversed themselves and investors are stampeding for the exits. At this point in the game how can anyone be surprised by bad news. Management and investors should realize that by now we are up to our necks in economic problems. Management and investors appear to be co-dependent in their delusional assumptions. DHL is laying off by the thousands and exiting entire business segments. Even the US post office is laying off employees. Then investors are surprised that Fedex is having trouble. Come on everyone, smell the coffee and wake up.

Met Life Optimistic S&P Assumption

Metropolitan Life (MET) issued new guidance of course and took the opportunity to guide down given the inevitable excuse that there are strong economic headwinds. They have a key planning assumption for 2009. That the S&P will increase by 5%. The starting point is supposedly 900 on Dec 31, 2008. But given the volatility of the markets it would have been helpful for management to show several different scenarios of growth and even contraction. We all know that the market may not behave itself in 2009. To assume a 5% growth rate is very sporty.

How much skin do senior officers have in the game that depends on a 5% increase?