Cerberus Capital Management LP, the private-equity firm that focuses on distressed assets, signed a nondisclosure agreement with BlackBerry Ltd. (BB), gaining access to financial information it could use to formulate a bid for the smartphone maker, said a person with knowledge of the situation.
The firm is in the early stages of considering an offer to acquire all of BlackBerry, said the person, who asked not to be identified because the deliberations are private. Cerberus may still choose not to proceed with a deal. Peter Duda, a spokesman for New York-based Cerberus, declined to comment, as did Adam Emery, a spokesman for Waterloo, Ontario-based BlackBerry.
Cerberus views BlackBerry as a viable turnaround business, rather than a set of assets to be sold off piecemeal, said the person. A Cerberus bid would bring competition to Fairfax Financial Holdings Ltd. (FFH), BlackBerry’s largest shareholder, which made a tentative offer on Sept. 23 to buy the company for $4.7 billion. BlackBerry co-founders Mike Lazaridis and Doug Fregin also said last week that they’re considering their own takeover.
BlackBerry put itself up for sale in August after years of losing ground in the smartphone market to Apple Inc. and Samsung Electronics Co. The company posted a 45 percent plunge in sales last quarter and a $965 million loss, dragged down by unsold inventory of its latest phones.
While Fairfax is the only prospective buyer to actually put a price on BlackBerry, the Toronto-based firm hasn’t announced the other partners in its investment group or shown that it has financing. That’s raised concerns that Fairfax’s $9-a-share offer won’t actually materialize, sending the shares almost 10 percent below the bid price.
Lazaridis, who invented the BlackBerry phone and served as co-chief executive officer until last year, has hired Goldman Sachs Group Inc. to help him explore a buyout -- though that deal is even less concrete.
If Cerberus pushes to keep BlackBerry whole, it would contrast with growing sentiment that a breakup is likely. Alberta Investment Management Corp. CEO Leo de Bever, whose firm has considered joining a bid for BlackBerry, said this month that potential buyers are struggling to craft takeover proposals for the whole company.
“It doesn’t necessarily mean that we want to take a carving knife to BlackBerry,” he said in an interview. “The odds are that’s what’s probably going to happen.”
Cerberus would bring expertise dealing with troubled companies. The firm, which manages more than $20 billion in assets, invested in automaker Chrysler in 2007 and led a group that acquired grocery-store chains from Supervalu Inc. (SVU) earlier this year.
Some of Cerberus’s investments have been difficult to turn around. In 2005, the firm agreed to pay $2.3 billion for NewPage, which makes coated covers for magazines. NewPage filed for bankruptcy in 2011 as it struggled with a shift of readers online. Cerberus’s investment in Ally Financial Inc. (ALLY), which was then known as GMAC Inc., suffered from the sluggish economy and its holding was diluted by a government rescue plan.
A BlackBerry deal wouldn’t be Cerberus’s first foray into Canada. In 2004, the firm invested about $190 million in Air Canada, the country’s biggest airline, which was in bankruptcy protection at the time. Cerberus then put $1.05 billion into a U.S. real estate portfolio owned by Canadian Imperial Bank of Commerce in the depths of the financial crisis in 2008.
BlackBerry’s Emery said his company wouldn’t be discussing further developments “until we approve a specific transaction or otherwise conclude the review of strategic alternatives.”
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