Private equity is set to create a new record for the world’s biggest buyout with the US$51 billion (£25.4 billion) proposed acquisition of BCE Inc, Canada’s largest phone company.

A group including the private equity unit of The Ontario Teachers’ Pension Plan and two American buyout firms — Providence Equity Partners and Madison Dearborn Partners — has agreed to pay C$42.75 a share in cash for BCE, valuing the group at US$32.6 billion.

Including its debt of $15.9 billion, the deal values the Montreal-based BCE at $51 billion. The transaction exceeds the $43.2 billion deal to take private TXU, the Texan utility, by Kohlberg Kravis Roberts and TPG.

However, it is possible that Telus Corp, BCE’s Canadian peer, could come in with a rival bid. Telus withdrew from the bidding process last week, citing “inadequacies” in the process.

BCE has agreed a $751 million break fee if the deal with Teachers’ falls through. KKR and the Canada Pension Plan also bid, as did Cerberus, with the Hospitals of Ontario Pension Plan.

BCE has a virtual monopoly in the fixed-line phone market in Ontario and Quebec and is the second-largest wireless operator. It offers internet services and satellite television and has a minority stake in CTV, which is Canada’s biggest privately owned television network. It also owns a stake in The Globe and Mail newspaper. Teachers was already BCE’s largest single shareholder, with a 6 per cent stake.

Teachers will own 52 per cent of BCE through its Teachers Private Capital, if the deal closes. Providence will have 32 per cent, Madison Dearborn 9 per cent and other Canadian investors will hold 7 per cent.

The deal comes at a time of intense scrutiny of the buyout industry over tax breaks, excessive debt and lack of transparency.

In Britain this week, the Commons Treasury Select Committee is set to question four leading buyout bosses as part of a wide-ranging inquiry into the private equity industry.

The Teachers consortium did not disclose how much debt it intended to use as part of the BCE acquisition, but typically buyout firms will fund their mergers with 75 per cent bank debt, with the rest being paid in cash.

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