(B)(N) BCE BCE Incorporated

Companies that grow “organically” are good for us. They don’t depend on worldly abstractions such as the global spot demand for raw materials or the Eurobond rate but have a visible “business” that has suppliers, products and services, and employees and customers whom they can see and nurture (please see, A Business is a Customer, September 2012). They can also integrate both vertically and horizontally by acquiring interests in their supply chain or in their competitors, and they are, therefore, by no means moribund and they have the means to do these things when it seems to make sense.

A good example (in our view) of vertical integration is the recent proposed acquisition of the visibly faltering ACM Astral Media Inc by the much larger BCE Inc. One needs only to contrast the Stock Price Charts (please see Exhibit 1 and 2 below) to see the difference and what it means to the affected stakeholders, which includes us as investors, and, of course, one should wonder what would happen to its services and dependants if it were no longer able to provide them, or for them, as the case may be.

Exhibit 1: ACM Astral Media Inc – Stock Price Chart

Astral Media Inc is a media company engaged in the business of specialty, pay, and pay-per-view television broadcasting, radio broadcasting, and outdoor advertising in Canada.

(Please Click on the Chart to make it larger if required.)

BCE’s petition to acquire Astral began in February and is still not completed pending further review by the Federal Competition Bureau and Canadian Radio-television Communications Commission (CRTC). Please see our recent Post, The All Canadian Four Play, October 2012, for more details. Undoubtedly, the societal issues of media concentration are complex and, possibly, ominous, but we have legislation to deal with that as a societal concern and in the past four years BCE has doubled its market value to $45 billion and pays its shareholders (who are also its customers for media services) an annual dividend of about $1.8 billion which is more than 10% of its net worth, every year, or $50 for every Canadian person – man, woman and child – or a 5% yield on its stock which anyone can buy, also for $50.

Exhibit 2: BCE BCE Inc – Stock Price Chart

BCE Inc is a communications company which provides wireline voice and wireless communications services, Internet access, data services and video services to residential, business and wholesale customers.

(Please Click on the Chart to make it larger if required and the Chart elements are described in many of our Posts.)

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”.

Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability.

We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now.

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