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BlackBerry Faces Breakup in ‘Bizarre’ Sale, Fund Says

BlackBerry Smartphones
BlackBerry Ltd. has dropped 11 percent to $8 a share since Fairfax Financial Holdings Ltd. announced last month a tentative bid to take the company private for $9. Photographer: Simon Dawson/Bloomberg

BlackBerry Ltd. will probably be broken up amid a “bizarre” bidding process that makes it hard to value the smartphone maker, according to a Canadian pension fund that’s considering an offer.

“It’s the most bizarre sales process I’ve seen in a long time,” Alberta Investment Management Corp. Chief Executive Officer Leo de Bever said this week in an interview. “We’re looking at it, but nobody’s come to us with a proposal that makes any sense.”

BlackBerry is soliciting rival bids after agreeing last month to a tentative $4.7 billion offer from its largest shareholder, Fairfax Financial Holdings Ltd. Under that pact, BlackBerry has until Nov. 4 to consider other proposals while Fairfax and a group of investors conduct due diligence and line up financing. Investors have grown increasingly concerned that the current deal will fall apart, sending the stock under $8 -- more than 10 percent below Fairfax’s $9-a-share offer.

Fairfax Chief Executive Officer Prem Watsa, who stepped down from BlackBerry’s board in August in order to put together a bid, hasn’t named any of the other members in his buyout consortium. While the group is seeking funding from Bank of America Merrill Lynch and BMO Capital Markets, no financing deal has been announced.

Investors, meanwhile, have moved on to evaluating individual BlackBerry units -- a sign a breakup is increasingly likely, de Bever said.

‘Carving Knife’

“We were looking at the individual assets because that’s how you understand the whole company,” said de Bever, 65. “But it doesn’t necessarily mean that we want to take a carving knife to BlackBerry. The odds are that’s what’s probably going to happen.”

Reuters reported last week that a number of technology companies, including Cisco Systems Inc., Google Inc. and Samsung Electronics Co., were in talks with BlackBerry about a sale.

Speculation that a rival bid may emerge helped drive up the stock 3.6 percent to $7.97 on Oct. 7 and an additional 0.1 percent yesterday. Still, the shares remain down 33 percent this year and have fallen about 95 percent from their 2008 peak.

BlackBerry’s latest outreach follows earlier attempts to find buyers. Before announcing in August that it was formally considering takeover bids, the company’s bankers spent almost a year canvassing potential acquirers, people with knowledge of the matter said at the time. JPMorgan Chase & Co. and RBC Capital Markets quietly contacted would-be bidders and found little interest in the whole company, especially among private-equity firms, the people said.

Strategic Buyer

Alberta Investment, which manages C$69 billion ($67 billion) for 310,000 current and retired government workers in Alberta, would be more willing to consider an investment in BlackBerry if there was a strategic buyer such as Google involved, de Bever said.

Aimco, as the fund is called, also wants to see the value of the company’s units disclosed, and a business plan for developing those units in the future, de Bever said from Edmonton, Alberta. Paul Rivett, president of Toronto-based Fairfax, declined to comment on the sale process yesterday, as did BlackBerry.

“We do not intend to disclose further developments with respect to the process until we approve a specific transaction or otherwise conclude the review of strategic alternatives,” said Lisette Kwong, a spokeswoman at BlackBerry.

‘Usual Suspects’

For a sale to work, someone who really understands BlackBerry’s assets will have to step forward, de Bever said.

“You can be sure that pretty much all the usual suspects are looking at this,” he said. “Now, how seriously -- that’s the question. Looking and doing something are two totally different things.”

If pension funds were to invest in BlackBerry, it would probably be in a coalition with private-equity investors, he said. He declined to name other investors that may be in talks with Fairfax and BlackBerry.

The smartphone maker has drawn interest from private-equity firm Cerberus Capital Management LP, which is looking to sign a confidentiality agreement with BlackBerry that would give it access to additional financial data, a person with knowledge of the matter said last week.

“Usually somebody comes to you and says, ‘This is what we have in mind, we’ve got an operational partner for this, this is how we’re going to deal with this asset and that constraint and this possibility,’” de Bever said. “There’s detailed business plans. Sometimes we initiate it. On this one, it’s a tough nut.”

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