BCE Inc., Canada's largest telecommunications company, said it would take Bell Aliant Inc private by buying the stake it does not already own in the company for about $3.95 billion.
BCE controls 44% of Bell Aliant, which offers telecom services in eastern Canada, and values the remaining stake at $31 per share - a premium of about 10% to the stock's close on Tuesday.
"Privatizing Bell Aliant enhances our broadband investment strategy and capital markets objectives," said BCE chief executive George Cope.
Bell Aliant shareholders can elect to receive either $31 in cash, or 0.6371 of one BCE share, or $7.75 in cash and 0.4778 of one BCE share for every share they own, the companies said.
BCE will fund the deal with available cash and will issue about 61 million shares to fund the equity portion of the deal.
BCE expects the deal to add about $200 million to its annual run-rate free cash flow, after dividends are paid. It also expects about $100 million in pre-tax annual cost savings.
The deal enhances Bell Aliant's ability to invest and serve customers in the Atlantic marketplace, while further developing its broadband and TV services, the companies said.
BCE said the next phase of its buildout of mobile 4G LTE service will be in Atlantic Canada and plans capital investment of $2.1 billion in the region over the next five years.