Later today, we may learn more about the M&A situation swirling around the manufacturer of my BlackBerry (NASDAQ:BBRY) Q10 smartphone.
Some weeks ago, Fairfax Financial (OTCQB:FRFHF,FFH:TSX) offered to acquire BBRY for $9.00 a share. This, you already know. I was dubious at the time, as the timing of the unfinanced letter of intent appeared to be designed to put a floor on the stock price the trading day after Blackberry warned that a brutal quarter was pending (see prior posts “BlackBerry moves suggest M&A process failing to produce a strategic buyer” Sept. 23-13 and “BlackBerry deal tests limits on M&A creativity” Sept. 24-13). As I wrote on Sept. 24th:
One can understand why Mr. Watsa wanted to add some momentum to what appeared to be a lethargic auction. But an unfinanced LOI isn’t going to fool any serious buyer. I don’t think Microsoft will suddenly try to top him at $11/share. If they want the company, they now know they can buy it for in and around US$9.00 a share.
Out of the gate, Fairfax’s CEO advised that we shouldn’t fret about the lack of detail around the offer, that the bid provided “certain value for shareholders“, and that “We’ve got more than we need,” in terms of financing partners:
“Our offer is a definite offer. We wouldn’t put our name to a deal with the board of directors of BlackBerry if it wasn’t a good offer.”
On October 10th, when the news broke that Mike Lazaridis was considering his own BlackBerry bid, I happened to be on BNN Business News Network, and had just written about some unusual statements from AIMCo about the state of the deal (see prior post “Confusion reigns over BlackBerry M&A process” Oct. 10-13). I told Catherine Murray that given his tight personal relationship with Fairfax’s Prem Watsa, Mike’s filing was a bad sign for those who were hoping that Fairfax had lined up the $4.3 billion in financing it needed to make good on its “offer”. It was reported that I’d said that “it was clear” that the FFH bid “had fallen apart”; not quite. On the 11th, I posted this on Twitter:
Mike’s 13D filing would lead a Vegas oddsmaker to conclude that the FFH is dying; AIMCo comments reinforce that view.
Frankly, the AIMCO interview with Bloomberg and the Globe and Mail was almost as insightful as Mike’s move, and will ring in the ears of many today should November 4th come and go without a formal agreement between FFH and BBRY (see prior post “Fairfax in the home stretch on BlackBerry acquisition, right?” Oct. 24-13). It was always a tall order in my mind, as North America is not awash with banks who want to take risk on money-losing technology companies. Whether we are talking $3.7 million or $3.7 billion.
For the BlackBerry board, even if Mr. Watsa’s financing hasn’t come together, it might make sense to extend the Fairfax due diligence period just the same. According to media reports, on what is surely the leakiest M&A process in modern times, Cerberus and Lenovo (OTCPK:LNVGF) are still interested in kicking the deal tires further. If the Fairfax LOI was meant to bring some excitement to the M&A process, you might as well leave it in place until a better offer — one you can close on — comes along.
To formally signal to Cerberus and Lenovo that they’re the only game in town steers you towards a $7 bid price, at best. So long as FFH appears to be in play, you might have some negotiating leverage.