May 24 (Bloomberg) -- Cerberus Capital Management LP, a New York-based buyout firm, recruited the Hospitals of Ontario Pension Plan as a partner in talks to buy BCE Inc., Canada's largest telephone company.

The Toronto-based pension-fund manager signed a non- disclosure agreement with Cerberus and committed equity, according to Andy Moysiuk, managing partner of the firm's buyout unit. He declined to disclose how much equity was pledged.

The Cerberus group is at least the third examining an offer, which would put Canada's most widely traded stock into private hands for the first time in more than a century. Other potential buyers are a group led by Canada Pension Plan Investment Board, which includes Kohlberg Kravis Roberts & Co., and the Ontario Teachers' Pension Plan, BCE's largest shareholder.

The hospital fund's investment is ``significant to HOOPP and significant to the consortium,'' Moysiuk said in a telephone interview. The fund manager oversees C$28 billion ($25.9 billion), he said.

Shares of Montreal-based BCE rose 7 cents to C$39.33 at 4:10 p.m. in Toronto Stock Exchange trading. They've advanced by almost a third since March 28, the day before newspapers reported a possible buyout offer. A buyout at today's price would be worth more than C$30 billion.

BCE, whose earliest predecessor was the Bell Telephone Co. of Canada founded in 1880, has traded in one form or another since at least 1905. The company announced yesterday that it's in talks with New York-based Cerberus and a group of Canadian investors, which the company didn't identify.

Mystery Members

The Globe and Mail reported today that the group includes the Hospitals of Ontario, the OPSEU Pension Trust and CanWest Global Communications Corp., Canada's biggest media company.

Representatives at OpTrust and CanWest declined to comment when reached by Bloomberg News.

Stephen Feinberg, a trader at Drexel Burnham Lambert Inc. in the 1980s, started Cerberus with $10 million in 1992. He built Cerberus into a $24 billion investment firm that also owns Albertson's LLC supermarkets and IAP Worldwide Services Inc., one of the largest providers of logistics support to the U.S. Army in Iraq.

The firm, named after the three-headed dog that guards the gates of hell in Greek mythology, agreed May 14 to invest $7.4 billion for a controlling stake in DaimlerChrysler AG's Chrysler unit.

CPP Examines Books

CPP, the Caisse de Depot et Placement du Quebec, and the Public Sector Pension Investment Board said on April 17 that they are in takeover talks with BCE, with New York-based KKR as a minority partner. PSP has since dropped out.

``We've been in our due diligence process for about two weeks now,'' CPP Chief David Denison said in an interview today. ``BCE is a large, multi-faceted company, so conducting effective due diligence takes a considerable period of time. We don't have a time frame in mind.''

BCE has said it expects to decide whether to pursue the option by the third quarter. Teachers' also said on April 17 that it's considering a bid for BCE. That bid may come as early as this week, the National Post reported May 19.

Neither Denison nor Moysiuk would disclose how many BCE shares they own.

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

Last Updated: May 24, 2007 16:14 EDT