BlackBerry Pegged at $12 Makes Reported Bid Look Good: Real M&A

BlackBerry Ltd. may be trading below what it’s worth, but not by much.

The debate over its value was reignited Wednesday, when Reuters reported that Samsung Electronics Co. approached the Waterloo, Ontario-based company with an initial takeover offer of as much as $15.49 a share, which both companies later denied. The stock closed Thursday at $10.11. Some shareholders say the rumored bid is too low. Is it?

A deal at that price implies a valuation for BlackBerry that it hasn’t commanded since it was the leader in smartphones. The reported offer also exceeds almost every analyst’s sum-of-the-parts estimate. If you take each of BlackBerry’s assets -- from the hardware business to its patents -- Wells Fargo & Co. calculates a value of $13.15 a share at most. CIBC World Markets Inc. says probably $11.83, maybe up to $14.49. About $10 if you ask Imperial Capital. That averages out to $12 or so.

“The net value of BlackBerry is very uncertain today because the company is squarely in the middle of its turnaround plans,” Brian Colello, a Chicago-based analyst for Morningstar Inc., said in a phone interview. “If the company is successful, then the stock is probably wildly undervalued. If it’s unable to transform itself, then there’s still more room to fall.”

Morningstar pegs BlackBerry’s fair value at $8 a share.

“We think $13 to $15 is a great deal for shareholders,” Colello said.

Stockholders wagering on a successful turnaround disagree.

Shifting Focus

BlackBerry, led by Chief Executive Officer John Chen, has shifted its focus to providing software and mobile security for governments and businesses as its lost considerable share of the consumer-smartphone market it once dominated. Investors are betting Chen’s efforts will drive up the stock and warrant a higher valuation.

The shares climbed 48 percent in 2014 after years of shareholders losses. The company’s market value at $5.3 billion is still a fraction of what it used to be.

BlackBerry gets offers all the time, according to a person close to the company, who asked not to be identified discussing private information. Investors would want a much higher takeover price than what Reuters reported, the person said.

The stock will be trading for $18 to $20 a share in a year, according to Christian Godin, head of equities at Montrusco Bolton Investments Inc. in Montreal who says he’s invested in BlackBerry for the long run. He sees the company growing steadily for the next five years as it executes on its plans to sell software that helps companies communicate and to connect devices that track shipping containers and vehicles.

“I didn’t sell yesterday,” when the stock surged 30 percent, Godin said. “I could have maybe reduced, but I didn’t.”

The climb was a fleeting opportunity to profit. BlackBerry fell 20 percent today.

Cashing Out

Another shareholder dumped his whole stake yesterday. Kevin Stadtler, president of Stadtler Capital Management LLC, said he sold his entire position when the stock reached $12.50, declining to say how much the stake was worth.

Stadtler said he didn’t believe a real deal was in the works. “It just didn’t add up,” he said.

BlackBerry said in a statement that it hasn’t engaged in discussions with Samsung with respect to any possible offer to purchase the company. Samsung called the Reuters report “groundless.”

‘God Bless’

The reported offer price was a range of $13.35 to $15.49 a share. At the high end, it values BlackBerry at about $7.1 billion after subtracting net cash, or 24 times its trailing 12-month earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg.

BlackBerry hasn’t had that rich of a valuation since its devices controlled half the market and Apple Inc.’s iPhone had yet to outsell them. BlackBerry’s market share has since shrunk to about 1 percent.

“That’s a lot of money for a company with about 1 percent market share in the U.S.,” Roger Entner, an analyst with Recon Analytics in Dedham, Massachusetts, said in a phone interview. “God bless them if they’re getting that, but that’s a lot of money for a company that’s not going anywhere.”

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