April 10 (Bloomberg) -- Shares of BCE Inc. surged as much as 6.5 percent after the New York Times and Globe and Mail reported the Canadian telephone company's largest shareholder is in talks with other investors to make a buyout offer.

The Ontario Teachers' Pension Plan approached Caisse de Dépôt et Placement du Québec and the Canada Pension Plan Investment Board to make a $45 billion bid, the Times said, citing unidentified people briefed on the talks. The Globe said Teachers enlisted U.S. buyout firm Providence Equity Partners Inc. to explore a takeover.

A deal would place one of Canada's oldest publicly traded companies and the country's most widely held stock in private hands. BCE's share gains have trailed those of rivals since Chief Executive Officer Michael Sabia took over, and he has since cut 9,000 jobs and sold units in a bid to woo back investors.

``Shareholders have been waiting for five years,'' Denis Durand, a senior partner at Montreal fund manager Jarislowsky Fraser Ltd., which oversees C$63 billion ($55 billion), said in an interview. ``BCE has been lagging its competitors in taking measures to improve return to shareholders. Mind you, BCE is an elephant in terms of size and complexity.'' Durand's firm sold its BCE shares ``a few years ago.''

Today's report follows a statement by Teachers yesterday that it's ``closely monitoring developments'' and exploring options regarding Canada's biggest phone company. Providence and the Toronto-based pension fund were willing to pay C$40 a share, or C$32 billion, the Globe reported today, citing unidentified people.

Shares Advance

BCE shares rose C$2.03 to C$34.67 at 9:32 a.m. in Toronto Stock Exchange trading. Earlier they climbed as high as C$34.77, the biggest gain in seven months. The Montreal-based company had a market value of C$26.4 billion, based on yesterday's closing price.

``The market is ready for a change in telecom,'' said Paul Budde, an analyst at telecommunications research company Paul Budde Communication Pty. in Bucketty, New South Wales. ``You have unleashed value in a company like BCE. This is positive news. It's an opportunity for shareholders to realize value.''

Teachers, Canada's third-largest pension fund, said it's not in talks with Kohlberg Kravis Roberts & Co. about a bid for BCE, responding to a report to the contrary in the Globe and Mail on March 29.

Talks With KKR

BCE shares roses as much as 12 percent that day after the Globe reported New York-based KKR might bid. BCE later that day said it's not in ongoing talks with any buyout firms and there are no plans for such discussions. According to the Times, KKR was rebuffed in talks with BCE this year. Teachers also appears to have been rejected in separate talks, the Globe said.

Mark Langton, a BCE spokesman, declined to comment on the Times report, as did Canada Pension plan spokesman Mark Wiseman. Teachers spokeswoman Deborah Allan couldn't immediately be reached for comment, and Officials at the Caisse and Providence also weren't immediately available to comment.

Before the March 29 gain, BCE's shares had risen 8.2 percent over five years excluding dividends, trailing the 68 percent return of Canada's benchmark Standard & Poor's/TSX Composite Index. Shares of rivals Telus Corp. and Rogers Communications Inc. have both tripled over that period.

BCE has sold stakes in CGI, Canada's biggest computer- services company, and Bell Globemedia, now known as CTVglobemedia, owner of the Globe. BCE also agreed in December to sell its Telesat Canada satellite unit, among Sabia's final steps in undoing the C$13 billion expansion led by former CEO Jean Monty.

Providence

Teachers' talks with Providence, based in Providence, Rhode Island, were informal and the two haven't made a bid because BCE has said it isn't interested in a sale, today's report in the Globe said.

The Globe report last month fueled speculation that BCE may be taken over. There's ``absolutely'' substance behind the talk because a buyout would help BCE cut taxes, which it sought to do last year by converting to an income trust, University of Toronto finance professor Laurence Booth said at the time. The company scuttled the conversion after the Canadian government decided to start taxing trusts.

BCE has examined cutting tax costs amid subscriber losses. About 181,000 wireline subscribers left in the latest quarter, switching to Web-based phone service or mobile devices. Mobile- phone users may exceed wireline users this year for the first time in Canada, according to IDC Canada analyst Lawrence Surtees.

To contact the reporter on this story: Chris Fournier in Montreal at Cfournier3@bloomberg.net

Last Updated: April 10, 2007 09:39 EDT