[the_sleuth]

Good article from professional money manager,

BlackBerry deal tests limits on M&A creativity

Is the Fairfax bid for BlackBerry fully financed or not?

According to Bloomberg News yesterday, it doesn�t appear so:

The Fairfax (FFH:TSX) coalition, which hasn�t been identified, is in flux and new investors could join while financing is lined up, said a person familiar with the matter.

Which begs a rather central question. How is there �certain value for shareholders�, as was released in a filing, if the necesary debt and equity financing isn�t firm? Fairfax may well be �highly confident that the consortium can fund the full amount of the consideration and all related transaction fees and expenses�, but that�s not the same thing as offering a fully-financed bid. In my life I can�t recall a ~$5 billion cash takeover bid being announced without the financing being lined up in advance. Often, the Regulators don�t allow such a tactic. According to Fairfax, they are working with Bank of America and Bank of Montreal to line up some debt financing � I�m guessing $1 billion tops � although the insurer has no plans to put in another penny beyond rolling the company�s current 9% BBRY stake (valued around $460 million).

Compare that to Michael Dell�s going-private of his company, where Mr. Dell rolled his 16% stake plus contributed another meaningful quantum of new dough to bring his partner Silver Lake on board. (As an aside, in months past Silver lake has let it be known that they aren�t going to be doing a BlackBerry deal, leaving CPP Investment BoardB without its Skype winger.)

Not that yesterday�s news came as a surprise to readers of this space, since the lack of a strategic acquiror was all but telegraphed by Friday�s massive restructuring (see my post from 6 hours before Fairfax�s announcement �BlackBerry moves suggest M&A process failing to produce a strategic buyer� Sept. 23-13). But, to be honest, Fairfax�s press release has the hallmarks of a no-downside strategy, provided the Regulators don�t take issue with it. Since Fairfax already owns what it owns, in the absence of a bidder, it might as well take the company private and see what can be done without the public glare of a quarterly financial reporting period. And by not putting up another dime of new money into the go-private proposal, Fairfax shareholders aren�t risking any more capital on a BlackBerry turnaround than they had exposed to the name, say, six months ago.

Whether or not that key fact should give confidence to the pensioners who are being asked to finance the balance of the equity needed to make the Fairfax deal happen is another thing.

I�m glad that Prem Watsa has been in discussions with BlackBerry co-founder Mike Lazaridis, if the media reports are true, as I think Mike�s connection to BBRY as an enterprise offering could help with the anounced return to a corporately-focused service offering. Catherine and I talked about that weeks ago on BNN�s Business Day show, and Mike�s presence could add to the attractiveness of the pitch being made right now to CPPIB, Teachers, CDP and HOOPP (see prior post �Lazaridis puts $50M where his mouth is� July 12-12). According to my market pals. AIMCo and PSP have made it clear that they�re not playing, and I�d be stunned if OP Trust or OMERS came on board the Fairfax bid, either. OP Trust is keen on predictable cash flow and OMERS just walked away from Public Mobile, a Canadian wireless start-up.

As high profile as the situation is, as takeover bids go, this one is incredibly unusual for two reasons. First, the Class Action lawyers will have a hard time believing there was no coordination between the Company�s 3pm Friday announcement of a $1 billion writedown and 4,500 layoffs with the noon Monday takeover proposal. Barely four market trading hours separated the two events. You can just hear the plaintiff lawyers now: �Fred Astaire and Ginger Rogers had nothing on these two.�

More importantly, unlike a �stalking horse bid� in a bankruptcy action, there is no BlackBerry bid today. There is no actual floor to the auction, as much as some commentators might claim. The current bidder isn�t stuck with the deal if no one else shows up to the party, unlike a true Stalking Horse proposal. There�s merely the premise of a bid in exchange for a break fee. And the premise of a bid existed immediately after Mr. Watsa stepped down from the BlackBerry board last month.

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. The BlackBerry Board has telegraphed that figure. Perhaps that�s the new reality, but to think that�s the outcome for a company which was once (just like Nortel) the most valuable publicly-traded company in Canada.

MRM
(disclosure � this post, like all blogs, is an Opinion Piece)

Wellington Financial Blog � News, Views & Purviews - BlackBerry deal tests limits on M&A creativity

[W Hoa]

Fairfax and Watsa are in the driver seat...... Without rival bids, then shareholders are at the mercy of Watsa et al.

Even with rival bids Watsa is in the drivers seat. Watsa holds, for all intents and purposes, 10% of BBRY shares.

The compulsory acquisition procedures generally state that, if within 120 days after the date of a take-over bid the bid is accepted by the holders of not less than 90% of the shares of the class to which the take-over bid relates (other than shares held at the date of the bid by or on behalf of the offeror or an affiliate or associate of the offeror), the offeror is entitled, on complying with the procedures set out in the applicable corporate legislation, to acquire the shares held by those holders who did not tender to the take-over bid - See more at: Take-Over Bids

[morganplus8]

Even with rival bids Watsa is in the drivers seat. Watsa holds, for all intents and purposes, 10% of BBRY shares.

Thanks W Hoa,

My question still stands, how much do Mikey and Prem want for their shares? This happens all the time and deals are done. Is $ 9.00/shr enough for Mikey, and/or several institutions, or is there a number that makes them all submit? Is it cash or less as the trolls would have you believe, did Mikey stay in this, along with Prem and the Funds because BBM-X is worthless, Patents are worthless, Enterprise is worthless? Really people, wait for the Q2 report and let's hear from the company about things as they are now.

[pooger]

Even if a deal better than $9 won't come along, why is the stock dropping from there? Do people feel that the deal won't go through at $9?

[Gekko]

Even if a deal better than $9 won't come along, why is the stock dropping from there? Do people feel that the deal won't go through at $9?

yes - the market doesn't believe a deal will happen at $9+. the market believes that BB is a melting ice cube.

[ADGrant]

Thanks W Hoa,

My question still stands, how much do Mikey and Prem want for their shares? This happens all the time and deals are done. Is $ 9.00/shr enough for Mikey, and/or several institutions, or is there a number that makes them all submit? Is it cash or less as the trolls would have you believe, did Mikey stay in this, along with Prem and the Funds because BBM-X is worthless, Patents are worthless, Enterprise is worthless? Really people, wait for the Q2 report and let's hear from the company about things as they are now.

The company announced a massive layoff and followed that up by announcing that it thought $9 a share was a reasonable price for the company. The market has responded by pricing BBRY almost a dollar lower. Why do we need to wait for the Q2 report? The board has already spoken and the market isn't convinced that Prem can close the deal.

[cjcampbell]

Well, outside of North America, they're still working to gain more market and monetize BBM. They have now added more functionality to the service.

http://m.mobilemarketingmagazine.co....wals-bbm-money

Posted via CB10

[fin2007]

At this point, the only company who could possible buy bbry is Samsung.

1. The patents may(or not) be very helpful for Samsung as it is fighting apple all the time right now on patents. I really do not see bbry patents have much value for MSFT/GOOG.

2. BBM could actually be helpful for Samsung, they can just preinstall it on every of their smart phones just like iMessage does on iphone, and the number of BBM users could easily go to 500M+ in two years if they push hard on it. And only samsung has the scale to do that considering it sold 70M smartphone in 2013 Q1. Again, BBM is not that useful for msft/google/apple, or any other Andriod players.

Overall, samsung is strong on hardware, but they have little footprint on software, for a high tech company with a size like Samsung, it is not good if you do not own any software part, just like all the old players Mot/NOK, things could change quickly if you do not own some special. And they have the money(8Billion profit in one qtr).

As for Lenova, I do not see the patents/BBM are that useful for it either.

I am not sure why Samsung has little interest on bbry considering the takeover price is so low now

[BlackistheBerry]

So... let's assume for a while that Prem is bluffing.
Let's also go with the story that no one else will make an offer.
Based on the above two, people say the shares will be worth around $5-6.

Now the question is - will Prem let that happen?
Will Mike let that happen?

Isn't it in their best personal interest (screw BlackBerry shareholders, let's assume they don't care for the shareholders ) to either take it and recover the most $ that they can, or let someone pay a decent price for their shares?

Do people really think it's too hard for Prem to come with a couple of billion dollars if he wants to????

The only argument that has some legs is that Prem has the option to make a lower offer, and maybe get a better deal than $ 9 per share.
He's not going to just walk away and let the price drop.

[heymaggie]

Do people really think it's too hard for Prem to come with a couple of billion dollars if he wants to????

Most successful investors don't put a huge percentage of their portfolio on companies like Blackberry if they want to stay that way. You may be swinging for a home run but you will strike out 3 out of 4 times.

[Gekko]

>Four years later, at $7 a share, Jim Balsillie's net worth has dropped $3.52 billion to $182 million. Michael Lazaridis' net worth has dropped $4.09 billion to $210 million.

LazyMike isn't worth that much anymore - $200M - surely not enough to make a play on his own. Watsa is "only" worth $3B. both would need huge financing to make a play happen here and it would entail a lot of risk for themselves and for the lenders. i don't see this happening.

[sparkaction]

You would have to think if FF was seriously interested in BlackBerry and the SP dropped to say $6 or $7 that FF would pickup shares in the open market. For the shares he could not acquire he may be prepared to pay $9 just to close the deal.

[Chris2J]

Blackberry makes me crazy, everytime they give you 1$ they take 2$
I go to grocery store to make my mind off things and buy a bottle bordeaux.

[fin2007]

>Four years later, at $7 a share, Jim Balsillie's net worth has dropped $3.52 billion to $182 million. Michael Lazaridis' net worth has dropped $4.09 billion to $210 million.

LazyMike isn't worth that much anymore - $200M - surely not enough to make a play on his own. Watsa is "only" worth $3B. both would need huge financing to make a play happen here and it would entail a lot of risk for themselves and for the lenders. i don't see this happening.

at the worst, he can just let go most ppl, sell the patents in cheap, and just profit from the service revenue which is still 800M a quarter. I do not see there is a big risk here.

[Jahcure]

>Four years later, at $7 a share, Jim Balsillie's net worth has dropped $3.52 billion to $182 million. Michael Lazaridis' net worth has dropped $4.09 billion to $210 million.

LazyMike isn't worth that much anymore - $200M - surely not enough to make a play on his own. Watsa is "only" worth $3B. both would need huge financing to make a play happen here and it would entail a lot of risk for themselves and for the lenders. i don't see this happening.

You are forgetting about the pension plan organizations that said they wanted in. One of them will be game.

Posted via CB10

[morganplus8]

Even if a deal better than $9 won't come along, why is the stock dropping from there? Do people feel that the deal won't go through at $9?

There is a "letter of intent" before the board, nothing else, it is an offer to buy the company, but it isn't free of conditions. Because of this and the rumour that Prem is not actively buying shares, the market makers are buying up shares in the hopes that a deal can be reached. If Prem wanted to buy up the shares and make a serious run at the company, it would be trading at $ 9.00/shr.. I would say that a great deal of the volume is related to shorts covering against the volume of stock being sold right now. The volume has dried up here, we are waiting to hear more about suitors and the Q2 on this quiet day. There is almost zero chance of an offer for the company in the first few days as due diligence needs to be done and an indication of what eveyone wants for their block of stock in order to approve of another offer. I don't think anyone will make an offer if Prem wants $ 22.00/shr for his block. They will likely want to know his intentions prior to considering a counter offer.

[greggebhardt]

Even if a deal better than $9 won't come along, why is the stock dropping from there? Do people feel that the deal won't go through at $9?

The $9 is not etched in stone, just an offer but it looks like it will be hard to pull investors together for the funds. This and other doubt is what is taking BBRY even lower.

[abouthsu]

So... let's assume for a while that Prem is bluffing.
Let's also go with the story that no one else will make an offer.
Based on the above two, people say the shares will be worth around $5-6.

Now the question is - will Prem let that happen?
Will Mike let that happen?

Isn't it in their best personal interest (screw BlackBerry shareholders, let's assume they don't care for the shareholders ) to either take it and recover the most $ that they can, or let someone pay a decent price for their shares?

Do people really think it's too hard for Prem to come with a couple of billion dollars if he wants to????

The only argument that has some legs is that Prem has the option to make a lower offer, and maybe get a better deal than $ 9 per share.
He's not going to just walk away and let the price drop.

I like the logic there for whatever its worth. Provide the doom and gloom and let the SP continue to slide a little bit more while he continue to average down and lower the SP is, the faster he get there and in return more profits for him. *theoretically speaking*

[Gekko]

You are forgetting about the pension plan organizations that said they wanted in. One of them will be game.

Posted via CB10

did they? i think it would be beyond irresponsible for a pension fund to invest in that deal.

[morganplus8]

You are forgetting about the pension plan organizations that said they wanted in. One of them will be game.

Posted via CB10

The fun with quoting off the Net!! LOL

The latest report I heard is that Mikey is worth $ 800 million and little Jimmy is worth $ 600 million, it's not all in BlackBerry in Mikey's case, fun with math though.

[abouthsu]

The $9 is not etched in stone, just an offer but it looks like it will be hard to pull investors together for the funds. This and other doubt is what is taking BBRY even lower.

I'm no expert in this by any means, but are you friends with Prem or do you know someone that is close to him? how do you know he is having hard time to pull investors for funding?

[Gekko]

"Fairfax is their biggest shareholder, so they have a defensive position that they need to take as well. I would look at this as putting a line in the sand, as telling the market that at $9 there is a buyer going well through due diligence," James Gellert, CEO at Rapid Ratings, said Tuesday.

If Fairfax succeeds in attracting another bidder who is willing to pay more than $9 per share, then it would also get an incentive fee of about 30 cents a share, or about $157 million. In addition, there are no financial penalties if Fairfax chooses to pull its offer off the table during the due diligence period, which ends Nov. 4.

It should also be noted that Fairfax is still working to raise financing for the deal, so there's a chance it might not be able to get the funds necessary to make a deal happen.

So there's not much downside for Fairfax for at least putting a bid out there. As far as other bidders go, there's still a chance, albeit slim, that someone might be willing to buy BlackBerry, said Colin Gillis, an analyst for BGC Partners.

Why the BlackBerry deal may be a fake out

[foxdog0007]

Long time reader of this thread. This is my first write up. Question : can Prem walk away from the 9 dollar / share deal, because there is no penalty to do so, and then enter with another offer, say 7 dollar per share?

Posted via CB10

[Gekko]

The fun with quoting off the Net!! LOL

The latest report I heard is that Mikey is worth $ 800 million and little Jimmy is worth $ 600 million, it's not all in BlackBerry in Mikey's case, fun with math though.

$200M or $800M - it doesn't matter - he's not a big swinging d1ck anymore to get a deal like this done on his own. read the Forbes list. Icahn? yes. LazyMike? no. he's a has-been.

[BlackistheBerry]

>Four years later, at $7 a share, Jim Balsillie's net worth has dropped $3.52 billion to $182 million. Michael Lazaridis' net worth has dropped $4.09 billion to $210 million.

LazyMike isn't worth that much anymore - $200M - surely not enough to make a play on his own. Watsa is "only" worth $3B. both would need huge financing to make a play happen here and it would entail a lot of risk for themselves and for the lenders. i don't see this happening.

I wouldn't base it on their net worths.
That's why I didn't say they HAVE.
I said they can COME UP WITH.
When Prem started, his net worth is said to be $8 ( no zeroes there). He didn't start anything with that.

I am sure I can come up with more than my net worth if I needed/wanted to, and I am sure so can you.

Most investors don't invest their own money even if they have it.
If I want to invest in a property worth a million $, even if I have a million $ cash, I will not pay cash for it. I will go get a mortgage.
The only thing I would need to do is to convince a lender that the property is worth it, and I will show my commitment by putting a down payment.

In the case of people like Prem, etc., I believe that they have a lot more convincing power than me.