Private equity firm Cerberus Capital Management reportedly wants to sign a confidentiality agreement to give it access to BlackBerry’s books.
The struggling Canadian smartphone maker, under offer from Fairfax Financial Holdings, is free to talk to…
Private equity firm Cerberus Capital Management reportedly wants to sign a confidentiality agreement to give it access to BlackBerry’s books.
The struggling Canadian smartphone maker, under offer from Fairfax Financial Holdings, is free to talk to other bidders while Fairfax conducts due diligence.
Aside from Cerberus, at least one other distressed-investing firm has taken an interest in BlackBerry, according to a person familiar with the matter cited by The Wall Street Journal.
On 23 September BlackBerry signed a letter of intent with a Fairfax-led consortium that proposed to take the company private for US$4.7bn, subject to due diligence. Fairfax – BlackBerry’s largest investor with 10% of the company – has six weeks to look over the books and hopes to execute a formal transaction by 4 November.
Fairfax’s US$9 per share offer reflects BlackBerry’s fall from grace amid intense competition from Apple and Android – its stock was trading at more than US$61 at the start of 2011.
Cerberus has been active in distressed investment since it started operating in 1992. On its website the firm says that it provides liquidity to investors seeking to exit troubled situations.
Should Cerberus come in for BlackBerry now, Fairfax would be entitled to a termination fee of roughly US$157m, depending on the smartphone maker’s share price. If Fairfax and BlackBerry ink a deal and Cerberus then comes and trumps the Canadian investor, Fairfax would receive around US$262m.
BlackBerry’s share price closed at US$7.96 yesterday. The fact that it is trading well below Fairfax’s non-binding US$9 per share offer reflects the uncertainties around the bid and the fact that it may be lowered, analysts have suggested.
The offer followed BlackBerry’s decision in August to form a special committee to examine strategic options, including a sale. It mandated JP Morgan and Perella Weinberg to advise it on the process.
After the strategic review was announced, Fairfax’s CEO Prem Watsa stepped down from BlackBerry’s board due to potential conflicts of interest that could arise. At the time Watsa said he planned to keep his shares.
Known as Canada’s answer to Warren Buffett, Watsa has been building his stake in BlackBerry for the last few years and is reported to have lost US$400m in the process.
