There is not apt to be any rival bidders vying to acquire BlackBerry.
The company’s desparation to secure a buyer saw it agree to pay Fairfax Financial’s investor consortium a rare $157 million breakup fee for a tentative takeover offer, which is likely to deter other potentially interested parties.
BlackBerry’s willingness to agree to a fee without signing a definitive agreement is “unheard of” and may have a chilling effect on its auction, according to Tor Braham, the former head of technology investment banking at Deutsche Bank AG. If a higher bid comes along, Watsa—a BlackBerry board member until last month—gets the termination fee plus he can cash out on an almost 10 percent holding.
The terms of the deal heavily favours Watsa, according to Willy Shih, a professor of management practice at Harvard Business School and former executive at Eastman Kodak, which is evidence of BlackBerry’s desparation.
Shih’s entiment is echoed by Morton Pierce, a New York-based partner in the mergers and acquisitions group of law firm White & Case LLP, who told Bloomberg that “it’s highly unusual that a seller gives a breakup fee to a buyer with no committed financing—you don’t do that if you have options.”
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The company recorded revenue from the sale of 3.7 million smartphones during last quarter. The majority of those sales were BlackBerry 7 devices, not the new Z10. The company said that revenue for sales of the new devices, which were shipped to carriers, won’t be recorded until they’re sold to end-users. In total, 5.9 million BlackBerry devices were sold to end-users during the period.
BlackBerry still has $2.6 billion in cash and investments, but its burning through that fast. The company spent $500 million of its cash on-hand during the quarter.
“We are very disappointed with our operational and financial results this quarter and have announced a series of major changes to address the competitive hardware environment and our cost structure,” Thorsten Heins, president and CEO of BlackBerry, said in a corporate release last week. “We understand how some of the activities we are going through create uncertainty, but we remain a financially strong company with $2.6 billion in cash and no debt.”
Photo: Shannon Stapleton/Reuters