China's Lenovo Group interested in BlackBerry
18 October 2013
Chinese personal computer maker Lenovo Group Ltd has signed a non-disclosure agreement to examine the books of Canadian smart phone maker BlackBerry Ltd, the Wall Street Journal reported yesterday, citing unnamed sources.
The Beijing-based company is looking to bid for the whole of BlackBerry, which includes its hardware business, security-focused service businesses and patents, the report said.
BlackBerry, based in Ontario, has already accepted a $4.7 billion takeover offer from a consortium led by its largest shareholder Prem Watsa's Fairfax Financial Holdings Ltd.
Earlier this month, BlackBerry co-founders Mike Lazaridis and Douglas Fregin revealed that they were also considering tabling a bid.
Lenovo makes its own line of smart phones, which has been successful only in the Chinese market, but it would become a global player with the acquisition of BlackBerry.
But any deal with Lenovo would attract the eagle eye of the Canadian government, which has earlier said that it would not like state-owned Chinese companies buying Canadian firms.
That decision came after Canada grudgingly approved Chinese state-run energy giant Cnooc Ltd's $15.1 billion acquisition of Canadian oil company Nexen Inc in December 2012. (See: Canada approves Cnooc-Nexen $15.1 bn deal)
Canadian Prime Minister Stephen Harper, who had come under fire from the opposition and some members of his own Conservative party on the Cnooc-Nexen deal, had said that Canada would only consider future acquisitions in the oil sands by state-owned companies in exceptional circumstances.
The Canadian government can veto any deal under the Investment Canada Act, if it feels that the transaction would not bring a "net benefit" to the country, or if it may pose a threat to national security.
Other governments around the world would also be alarmed with a potential BlackBerry-Lenovo deal since BlackBerry has a large number of government customers using its platform, specially the US, since many of its government officials, including White House staff and President Barack Obama, use BlackBerry devices.
Blackberry, which recently changed its name from Research In Motion, has seen its shares plunge by around 90 per cent from over $80 per share in mid-2009 to around $8.82 per share, and its market value down to $4.7 billion, from its 2008 peak of a whopping $84 billion.
Till recently, BlackBerry, a pioneer in providing secured emails on handheld devices, had firmly pushed for staying independent, pinning its hopes on a turnaround from sales of its latest smart phones.
But its financial problems came to a head this year after disappointing sales of its new Z10 model smart phone that was released in January - after many delays.
The company has been soliciting buyers since last month, when it revealed a $1 billion loss for the quarter ended 30 June and said that it would cut 4,500 jobs.
Last month Blackberry reached a preliminary deal to be acquired by a consortium led by its largest shareholder, Fairfax Financial, for $4.7 billion. (See: Blackberry receives $4.7-bn buyout offer from Prem Watsa's Fairfax Financial)
Fairfax, with about 10-per cent stake, had offered $9 a share in cash, a mere 3.2 per cent premium to BlackBerry closing price on 20 September, valuing the company at about $1.9 billion excluding the $2.8 billion in cash reserves.
Under the preliminary deal with BlackBerry, Fairfax has until 4 November to table a definitive bid for the company.
But Fairfax, whose proposed acquisition is subject to receiving financing commitments from Bank of America Merrill Lynch and BMO Capital Markets, has run into trouble since it may not be able to come up with partners or full funding for the deal.
Early this month, Bloomberg had reported that potential suitors like SAP AG, Cisco Systems and Samsung, which were approached by BlackBerry advisers, have indicated that they are only interested in parts of the company.