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"Everybody's talking, nobody's doing"

Leo de Bever, CEO of Alberta Investment Management Corp

The Globe & Mail, Oct. 8, 2013

As unexpected statements go, that just about tops the list as far as we've seen to date in the Annus Horribilis that is BlackBerry's (NASDAQ:BBRY) 2013. Kudos to the Globe's Tara Perkins for getting the head of a $70 billion pension plan to wax about a topic that should probably have been off-the-record, or postponed until after the proposed Fairfax deal, say, collapsed under the weight of its own self-imposed expectations.

For those BlackBerry shareholders and users who are banking on a firm $9 bid from Fairfax Financial (OTCQB:FRFHF), Mr. de Bever's genuine, cathartic complaints will add to the discomfort of the past couple of weeks. There just was no hint of dissembling at work, not with CPPIB CEO Mark Wiseman's fair restatement of the obvious to Bloomberg's Katia Dmitrieva:

Given that BlackBerry is clearly for sale or looking for strategic solutions, it would be fair to assume that we would analyze that and try and make a determination as to whether it makes sense on a risk-adjusted basis for us to participate in a financial bid.

Near as I can deduce, the BlackBerry board is clearing the decks to get ready for any eventual outcome (see prior post "BlackBerry moves suggest M&A process failing to produce a strategic buyer" Sept. 23-13), including settling patent infringement lawsuits that have been outstanding for years with KIK and Wi-LAN.

All of which makes sense if Fairfax really is going to make a formal bid by November 4th. But if they are, why is one of Canada's largest pension plans complaining about "nobody doing" anything to make the deal come together? Fairfax needs to raise ~$4.2 billion of debt and equity to make the previously-announced deal work, and it would seem unlikely to not include a group like AIMCo on your short list of local capital sources, along with CDP, CPP Investment Board and OTPP as has been previously rumoured (see representative prior post "CPP Investment Board to take BlackBerry private?" Aug. 9-13). Why, then, would AIMCo think that "nothing" is going on, since they should be the ones best-positioned to know where the Fairfax bidding group stands?

Mr. de Bever said that "As a Canadian, I would like to have a solution that gives me profitability and a viable company - hey, why wouldn't I? But so far, that hasn't been happening." He went on to qualify his perspective by admitting that "maybe there is something brewing that I'm not aware of because it hasn't surfaced yet." Could Fairfax have decided to exclude AIMCo from its syndicate? Quite possibly.

If I'm Cisco (NASDAQ:CSCO), or Cerberus, who are reported to be kicking the BlackBerry tires, too, I'll definitely be scratching my head at this recent development: who talks, on the record, during an M&A auction? Remarkably, the implication of the Globe interview that the great Canadian pension plan/Fairfax bidding syndicate had stalled was bolstered by a Bloomberg story the following day.

In it, Bloomberg reported that "BlackBerry Ltd. is more open to a breakup of the company amid concerns that Fairfax Financial Holdings Ltd. may be unable to line up funding or partners for a $4.7 billion buyout, a person with knowledge of the matter said."

Holy smokes! There are only two reasons why someone close to the company would want to put that story out there.

First, to send a message to the likes of Cerberus (see prior post "As BlackBerry shares swoon, a different kind of buyer emerges" Oct. 3-13) and Cisco that the BlackBerry board is worried that Fairfax isn't going to pull its financing together (see prior post "BlackBerry deal tests limits on M&A creativity" Sept. 24-13), and they should spend the next 14 days in the data room. (It also serves as a chance to send a message to the officials at Industry Canada, who may ultimately have to opine on certain BlackBerry takeover proposals.)

Or, second, to introduce some bid price tension into whatever negotiations are going on between BlackBerry's investment bankers and Fairfax; to hold out the spectre of a BlackBerry break-up, where the ultimate transaction value may exceed $9 a share to one or more parties, does have the virtue of potentially putting a floor of $9/share should Team Fairfax now be thinking that their initial offer was a tad rich.

Whatever is going on, the process gets funkier by the day.

Source: Confusion Reigns Over BlackBerry M&A Process