On Wednesday, BMO (TSX:BMO) Capital adjusted its stock price target on BCE (TSX:BCE) Inc . (NYSE:BCE:CN) (NYSE: BCE), increasing it to C$47.00 from C$46.00, while maintaining a Market Perform rating. BCE Inc . recently made headlines with its announcement of a deal to divest its Northwestel operations. The sale to Sixty North Unity (NYSE:U), a consortium of indigenous communities, is valued at $1 billion. BCE has been the owner of Northwestel since 1988.
Northwestel, which accounts for approximately 1% of BCE's consolidated revenues and EBITDA, is expected to change hands in the fourth quarter of 2024. On completion of the transaction, BCE will receive $850 million. The company plans to allocate the proceeds from this sale towards reducing its debt.
According to BMO Capital's analysis, this move is anticipated to decrease BCE's debt-to-EBITDA ratio by roughly 0.1x. The ratio stood at 3.9x in the first quarter of 2024, including preferred shares.
The transaction's impact on BCE's financial leverage has been a point of interest, as the anticipated debt reduction is seen as a positive step for the company's balance sheet. With the closing of the deal set for later in the year, the immediate financial effect of this divestiture will be reflected in BCE's subsequent financial reporting.
The sale of Northwestel is a significant move for BCE as it streamlines its operations and focuses on its core business areas. The agreement with Sixty North Unity also highlights a shift towards greater involvement of indigenous communities in owning and operating significant infrastructure in the far north.
BMO Capital's revised stock price target reflects the firm's outlook on BCE's financial performance following the Northwestel sale. While the Market Perform rating indicates a neutral stance on the stock, the slight increase in the target price suggests a modestly improved financial position for BCE post-transaction.
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