BB - BlackBerry

[TwoCitiesCapital]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

 

 

 

 

Yeah, but we knew the inner workings of ORH and Prem knew them even better than we did.  And, did we get fair value for our ORH shares?  Just sayin'    :-[

 

So if the markets value something at a steep discount to intrinsic value, and someone offers more than the market price but less than the intrinsic value, then that isn't fair?  If FBK, ORH and BBRY shareholders could get more, somebody should have offered more sooner.  I don't think Buffett and Prem are in the business of paying full price for everything, otherwise their shareholders might get peeved.  Cheers!

You don't compound returns like they do by paying full price for anything. Also, Watsa's first and foremost responsibility is to the stakeholders in Fairfax. That is why he resigned for the board of BBrY when they became serious about selling - it was clear that a conflict would exist with a duty to very different shareholders with very different interests. Watsa doesn't owe anything to BBRY shareholders after he resigned and to expect him to pay them more than he could would be slighting Fairfax shareholders. Watsa did his best on the board but the company seems like it was too far gone. He did his best, but by owning the shares after he left you should have realized that you now had competing interests with him - and he has  billions of dollars and rich friends. I sold 25% of my position and covered calls against the rest before earnings with the expectation they would be awful and that there was a very real possibility of losing money on his bid.

[shalab]

Made money off of this one ( sold puts and bought back ) thanks to Prem  ;D. Didn't have a huge position to turn the needle though.

 

The NYTimes published an article today - not entirely positive; glad I got out today with a profit.

 

http://dealbook.nytimes.com/2013/09/23/blackberry-reaches-4-7-billion-takeover-deal/?hp&_r=0

 

[ERICOPOLY]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

 

 

Yeah, but we knew the inner workings of ORH and Prem knew them even better than we did.  And, did we get fair value for our ORH shares?  Just sayin'    :-[

 

A lot of the value (the historical 20% returns) generated by ORH actually comes from HWIC.  And FFH already owned 100% of HWIC, with ORH owning absolutely no part of HWIC. 

 

So I thought it reasonable that when we think about what a "fair" price is for ORH, we should consider how much value ORH generates without HWIC's involvement.  Then, at that point, think about whether ORH's buyout at 1.3x was reasonable.

 

People have expressed their dismay that it isn't fair to "steal" something growing at 20% annualized for just 1.3x book -- but they didn't grow at 20% annualized without HWIC's help -- and HWIC's added value needed to be stripped from the deal given that they weren't in any way a part of the deal (already owned by FFH 100%).

 

I don't recall the underwriting from ORH up until 2009 being particularly exceptional where they'd be worth much more than 1.3x book (ignoring HWIC's contributions).

[Grenville]

Made money off of this one ( sold puts and bought back ) thanks to Prem  ;D. Didn't have a huge position to turn the needle though.

 

The NYTimes published an article today - not entirely positive; glad I got out today with a profit.

 

http://dealbook.nytimes.com/2013/09/23/blackberry-reaches-4-7-billion-takeover-deal/?hp&_r=0

 

Interesting to see BDT, Byron Trott's firm advising Fairfax.

 

BDT & Company, LLC, BofA Merrill Lynch and BMO Capital Markets are acting as financial advisors, and Shearman & Sterling LLP and McCarthy Tetrault LLP are acting as legal advisors to Fairfax in connection with the transaction.

[wachtwoord]

So if the markets value something at a steep discount to intrinsic value, and someone offers more than the market price but less than the intrinsic value, then that isn't fair?  If FBK, ORH and BBRY shareholders could get more, somebody should have offered more sooner.  I don't think Buffett and Prem are in the business of paying full price for everything, otherwise their shareholders might get peeved.  Cheers!

 

No Parsad, but this is the same thing as with DELL. They don't have to offer IV of they don't want to, but it's unfair that I'm obligated to sell my shares. They're mine and I should be able to use them as I please. I don't want to sell my DELL shares for 13.88 and I don't want to sell my BBRY for $9 but it seems like I'm sore out of luck in both cases.

 

Then again, no-one ever said life was fair :)

[james22]

I don't want to vote for the merger and sell my shares.

 

It's ridiculous that CEO Thorsten Heins is getting $56 million for selling the company; it incentivizes him to do the deal at any price.

 

The Board of Directors is [rough euphemism for mistreating shareholders].

 

These all may be true. But these are among the risks of being a minority shareholder in a company. These are the risks of investing in a company whose previous co-CEOs saw their tenure end amidst tragically comic mismanagement, so much so that the company's market capitalization rose by nearly half a billion dollars upon the announcement of their departure. These are the risks of investing in a company whose current CEO drove the market cap back down over a billion dollars on the first day of his tenure. And these are the risks of investing in a company whose board of directors has seemed clueless, incompetent, and/or disinterested throughout the stock's long slide from triple digits to single digits.

 

... if you're upset that the board isn't looking out for individual shareholders, one question: why on Earth are you surprised?

 

http://seekingalpha.com/article/1709702-blackberry-bulls-just-stop

[Guest Dazel]

 

 

The Orh deal was fair and friendly.

 

Dazel.

[cwericb]

I’ve owned ORH, FBK and a very small amount of BBRY and have learned, as have several other board members, that it is not always a good idea to own companies in which FFH invests. The “fair” in Fairfax does not necessarily extend beyond Fairfax’s best interests. The next time I think of buying something that FFH owns I will simply put those funds into the Mothership.

 

One can’t criticise PW for looking after FFH shareholders, but it often comes at the expense of shareholders of other companies.

 

PS. There seems to be a lot of us x-FBK investors that are now invested in Altuis. Lets hope Prem doesn’t hear about it.  :)

[rkbabang]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

 

I agree with you, with Fibrek he did what was best for his shareholders, which is what he should have done.  I owned a small amount of Fibrek and (at the time) a huge amount of Fairfax, so I didn't have much to complain about.  But as I said, it is dangerous to invest along side Fairfax. I've made money every time I've invested along side Biglari for instance (I'm kicking myself for not buying Cracker Barrel, that was the first major investment SB made that I didn't invest along side him since WEST), not many can say the same thing for investing along side Fairfax.  My criticism of this current deal isn't that they are screwing BBRY shareholders (although some with an irrationally bullish view on BBRY might think differently), but that Fairfax is making a bad deal for their own shareholders.  I'd be more comfortable if they let this go even if it meant writing off most of the $900M they invested in this train wreck.  I don't see throwing good money after bad as a good thing.  And even if they really wanted to buy it, they could have let it sink further and bought it for pennies in 6 months.

[StubbleJumper]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

 

 

Yeah, but we knew the inner workings of ORH and Prem knew them even better than we did.  And, did we get fair value for our ORH shares?  Just sayin'    :-[

 

So if the markets value something at a steep discount to intrinsic value, and someone offers more than the market price but less than the intrinsic value, then that isn't fair?  If FBK, ORH and BBRY shareholders could get more, somebody should have offered more sooner.  I don't think Buffett and Prem are in the business of paying full price for everything, otherwise their shareholders might get peeved.  Cheers!

 

 

The fundamental difference with ORH is that Prem controlled something like 75% of the float through FFH's holding, so  a potential suitor would be unlikely to waste time in trying to top FFH's bid.  For all we know, it is entirely possible that FFH may have received a few phone calls about buying ORH but as minority holders we'll never know what else could have been on the table.

 

 

SJ

[StubbleJumper]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

 

 

Yeah, but we knew the inner workings of ORH and Prem knew them even better than we did.  And, did we get fair value for our ORH shares?  Just sayin'    :-[

 

A lot of the value (the historical 20% returns) generated by ORH actually comes from HWIC.  And FFH already owned 100% of HWIC, with ORH owning absolutely no part of HWIC. 

 

So I thought it reasonable that when we think about what a "fair" price is for ORH, we should consider how much value ORH generates without HWIC's involvement.  Then, at that point, think about whether ORH's buyout at 1.3x was reasonable.

 

People have expressed their dismay that it isn't fair to "steal" something growing at 20% annualized for just 1.3x book -- but they didn't grow at 20% annualized without HWIC's help -- and HWIC's added value needed to be stripped from the deal given that they weren't in any way a part of the deal (already owned by FFH 100%).

 

I don't recall the underwriting from ORH up until 2009 being particularly exceptional where they'd be worth much more than 1.3x book (ignoring HWIC's contributions).

 

 

I agree that HWIC's investing prowess was a significant part of the ORH value-proposition.  However, I would remind you that ORH paid HWIC an investment fee for their services and there is no reason to assume that there would be a change in this fee for service relationship if another suitor had ultimately purchased ORH.

 

 

SJ

[petec]

I agree that HWIC's investing prowess was a significant part of the ORH value-proposition.  However, I would remind you that ORH paid HWIC an investment fee for their services and there is no reason to assume that there would be a change in this fee for service relationship if another suitor had ultimately purchased ORH.

 

 

Surely there is every reason to expect that they would not manage the investments of a company they did not own 75% of.  They don't manage 3rd party money.

[Cardboard]

I believe that the ORH deal was fair. Fairfax controlled the company and still paid a nice premium to minority shareholders. It was even raised. In a fair deal, there is something positive for both parties. That one seems to meet that test.

 

Fibrek and Blackberry are entirely different IMO. The transparency and fairness is nil.

 

On the first one, a deal is made at a lower price than the best offer. Why? Seems because Fairfax held a lot of Abitibi or Resolute. Isn't a major conflict of interest?

 

On Blackberry, the share price is walked down by 20% on Friday and acquired pretty much at that price on Monday. Anyone knowing the mechanics of the stock market knows that such news late Friday afternoon would create a panic. I would also like to remind everyone that the price offered is lower than where it traded before any strategic alternative study was announced or rumoured.

 

Is Blackberry doing poorly? Sure. Is $9 the best offer that could be found by the board of directors? Seems highly unlikely. What can be done privately that cannot be done publicly? I have no clue.

 

It seems to me that shrinking and breaking up Blackberry could have been done as much publicly as it will be done privately. The only difference is that a group will be able to recoup some of their investment while minority shareholders have been screwed.

 

Cardboard

[SharperDingaan]

The reality is that in most cases a FFH investment in the company you follow is the kiss of death, baring few exceptions. They are masters of the creeping takeover, they do not pay premiums for control blocks, & they are not above employing SAC tactics when it serves their purpose. In most cases, as an investor, you would actually make more by shorting the investment.

 

FFH itself is also the kiss of death; you make money by betting against them, not with them. Seasonality & volatility are your friends, not the IV growth or investment prowess of HW. SAC also demonstrated that you would make the most $ when FFH itself is the target of the tactics; provided you execute in an acceptable manner. As investors, you make more when FFH is stressed; & with respect to FFH, HW is an owner - with a very different interest; not an investor.

 

Most would be better served if FFH were systematically shorted to exaggerate their seasonality & volatility. Their institutional investors would earn lending fees, the price swings would widen, & FFH would experience some discipline. Those big bets have diminished their flexibility, & they could use a little hubris to dilute the cool aid of recent years.

 

Sounds harsh, but discipline usually is.

 

SD

 

[tengen]

... I'd be more comfortable if they let this go even if it meant writing off most of the $900M they invested in this train wreck.  I don't see throwing good money after bad as a good thing.  And even if they really wanted to buy it, they could have let it sink further and bought it for pennies in 6 months.

 

I agree in that I wish FFH had never invested in BBRY in the first place and I have strong doubts that anyone can salvage this company. Having said that, if the company is to be salvaged, the time to take it private is now, not in 6 months time.

[txlaw]

I will provide some more commentary in response to some of the posts above and in other threads, as well as to some of the PMs I've gotten about BBRY and FFH. 

 

Not surprisingly, there's a lot of concern among FFH holders about whether PW is throwing good money (and time) away by putting together a BBRY buyout deal that may actually go through at $9 per share. 

 

First, it should be noted that FFH seems to be rolling their shares into the deal and not adding any new money.  Second, giving PW the credit he deserves, I doubt that he's irrationally throwing money away in an attempt to "emotionally salvage" the investment (i.e., throwing good money after bad) or to simply "bet on Canada."  The consortium purchase price means that it is highly likely that PW and the consortium believe they will receive substantially more than $9 in IV in a break-up scenario, which is inevitable now. 

 

Again, it is highly likely that value will be "unlocked" by breaking up the company into separate collections of going concern businesses (e.g., MDM and Secure Workspace biz) and assets (e.g., patents).  That value will accrue to the buyout consortium, assuming financing comes through and enough consortium money stays on board.  The financing will be a combination of equity and debt.  Given that it would be crazy to put long-term debt onto a company like BBRY, I'm thinking any debt will be a bridge loan to provide liquidity as BBRY is dismantled.

 

Now, as to the fact that break-up value will be accruing to a buyout consortium, rather than OPMIs, this is the result of a couple of factors: (1) Nobody other than a buyout consortium (who I believe will be breaking the company up, anyway) wants to buy BBRY in its entirety; (2) Up until now, it has been in the best interest of potential asset acquirors to wait for a near-term collapse in operational metrics and public market price before picking up those assets on the cheap; and (3) BBRY management and strategic advisors have failed to take the appropriate actions in the last year to provide a contingency plan that could have been executed in a timely manner in the event of BB10 failure (e.g., why would they not have lobbied the Canadian government for foreign takeovers before?). 

 

This is me talking with hindsight, of course.  I didn't take enough of this into account when making my latest investments in BBRY.  (I made a boatload of money on my initial tranche of BBRY shares, but am slightly in the red on my latest tranche.)

 

Now, here is the silver lining for OPMIs with respect to the buyout bid. 

 

If you are a potential acquiror of BBRY assets, it has been in your best interest to let the company essentially run-off until you can get a cheap enough market price to pick off assets at bargain prices.  It's like with any bid for assets when there is "distress."  You get the best price when there is panic and desperation to preserve asset value or to get Mr. Market to value assets at a higher price (think, e.g., CHK sale of assets and discount prices).  BUT -- BBRY is a company with no debt and that is not under threat of burning completely through their entire cash position, even now IMO.  They certainly won't burn through all that cash if a PE consortium comes in.  Thus, the PE consortium can take the appropriate actions and negotiate for a higher price for assets than public shareholders, who want to get out as soon as the getting out is good, with only arbs remaining.

 

What this might mean is that asset acquirors could show up now and try to split the difference between what they would have to pay to public shareholders versus a PE consortium.  There is even more of an incentive to do this too because of the nature of BBRY's assets, which deterioriate as the tech market rapidly changes. 

 

Thus, the "flush out" theory is a valid one, IMO.  Not in terms of buying the entire company, but for buying certain assets.  So I think it's too early to "call the game" just yet. 

[Guest wellmont]

dan niles made a good point yesterday. he said how can a financial buyer add value? if tech buyers and consolidators who can offer synergies and economies of scale, don't see value, how could financial buyers? the answer as to why now is in a PW interview at WSJ. If he doesn't step in and take control by November, the company is headed to Zero. He pretty much said this.

 

And why is it that the only people who are willing to put money up are Canadian? what does that say? the fact is that the business is in free fall. no company likes to step in front of a moving locomotive and put money on a business that is in such disarray. Niles said in all the years he has been watching tech he has never seen as rapid a crash in business as this quarter for bbry.

 

I don't think anything is "highly likely" when it comes to bbry except bb10 is history and so are devices. Certainly the consortium does not seem at all confident. They seem to be reluctant in fact. the pension funds are not natural investors in a deal like this. they are last resort investors. If they were "highly confident" they would simply put a binding offer on the table and take it private. they have put up a non binding stalking horse bid and are praying somebody comes along and tops it. these pension funds do not want the risk of this business. A consortium like this does not ordinarily take companies private and then slice and dice them to try to make money. that's the job of p/e. and they want no part of this. The consortium is a last resort investor, who have had to spring into action as a result of a disastrous plan executed by senior management at bbry.

 

pw seems reluctant. He is not willing, it seems, to put another dime into this. He knows the company inside and out yet he needs another month for DD? ridiculous.  that's a stall in the hopes that somebody comes along and takes his stock +3. He does not want this headache. But he has money on the line and he is hoping he can salvage some of it. And if he has to control it, so be it. Because the management he backed is incinerating his capital.

 

The fact is the market does not even believe that the PW group will offer $9.

[tng]

$9/share is an attractive price for control of the company. There is $6/share in cash on the balance sheet and if you chop up the rest of the business and sell it, I think you can easily get more than $3/share. That patent portfolio alone is worth at least that much. BBRY is not an investment without the controlling stake because you don't know if the company would throw that cash away fighting an impossible battle against Apple and Google, but with a controlling stake it is an interesting investment.

[txlaw]

dan niles made a good point yesterday. he said how can a financial buyer add value?

 

I would agree with this statement.  It's not about a financial buyer like the FFH consortium adding value.  It's about capturing the value between $9 and break-up value. 

 

if tech buyers and consolidators who can offer synergies and economies of scale, don't see value, how could financial buyers? the answer as to why now is in a PW interview at WSJ. If he doesn't step in and take control by November, the company is headed to Zero. He pretty much said this.

 

I think it remains to be seen whether tech buyers and consolidators see value there.  Even if the FFH buyout deal closes, it is more likely than not that the ultimate owners of a large percentage of the assets are strategics rather than the consortium.

 

I've not seen the interview you're referring to where PW says he thinks the company is headed to zero.  If you could excerpt it, I'd be interested in seeing that.

 

And why is it that the only people who are willing to put money up are Canadian? what does that say? the fact is that the business is in free fall. no company likes to step in front of a moving locomotive and put money on a business that is in such disarray. Niles said in all the years he has been watching tech he has never seen as rapid a crash in business as this quarter for bbry.

 

I don't think anything is "highly likely" when it comes to bbry except bb10 is history and so are devices. Certainly the consortium does not seem at all confident. They seem to be reluctant in fact. the pension funds are not natural investors in a deal like this. they are last resort investors. If they were "highly confident" they would simply put a binding offer on the table and take it private. they have put up a non binding stalking horse bid and are praying somebody comes along and tops it. these pension funds do not want the risk of this business. A consortium like this does not ordinarily take companies private and then slice and dice them to try to make money. that's the job of p/e. and they want no part of this. The consortium is a last resort investor, who have had to spring into action as a result of a disastrous plan executed by senior management at bbry.

 

You are presenting the consortium as though it is made up solely of FFH, which is not the case.  We have no idea who the rest of the consortium is. 

 

If it's private equity, pension funds, or even strategics, there is unlikely to be a need to "spring into action" to save BBRY.  No pension fund is going to "throw good money after bad" for BBRY, if they even own any BBRY.  The only reason why anyone would put new money into BBRY at $9 a share, without having a capital markets "out," is because they think it's likely (yeah, maybe not "highly likely") that they can get more for their money, most likely by splitting the company.  I don't buy the "Canadian pride" argument.

 

The fact that the consortium membership is in flux suggests that these guys don't need to get on board with any buyout.  That's why I wouldn't be surprised if any buyout negotiations had gone from a substantially higher price down to $9 over the weekend. 

 

pw seems reluctant. He is not willing, it seems, to put another dime into this. He knows the company inside and out yet he needs another month for DD? ridiculous.  that's a stall in the hopes that somebody comes along and takes his stock +3. He does not want this headache. But he has money on the line and he is hoping he can salvage some of it. And if he has to control it, so be it. Because the management he backed is incinerating his capital.

 

The additional month of DD is not for PW. 

 

It's for the rest of the consortium.  I imagine whatever the membership was when PW resigned from the board has changed substantially in the last couple of days because of the pre-announcement and the BBM roll-out botch.  It's only natural that any consortium look at the books exhaustively before following through with any deal at $9.

 

It's not clear to me whether this action should be considered a stall by FFH or a prod by BBRY -- after all BBRY agreed to go public with the bid (see Davidoff article).  I think from BBRY management's perspective, they're thinking of this as a prod to the other buyers they've been talking to.  It may or may not work.

[ItsAValueTrap]

If they take Blackberry private, then management can do things that may be unpopular with Wall/Bay Street.  I think that Blackberry should have gone along with the founders' original plan.  They were going to get out of the smartphone wars and focus on the better parts of Blackberry (low-cost semi-smart phones for emerging markets, corporate, etc.).

 

Maybe I'm crazy but successful founders are often better than the CEOs who replace them.  Lazaridis and Balsillie built a multi-billion dollar corporation from scratch.  That's an impressive track record!

 

2- Whether or not the buyers are Canadian does matter a little bit.  The Canadian government has been blocking foreign takeovers lately.

 

*No position in BBRY, I covered.  (I lost money going long BBRY, made a bit of it back on the short side.)

[Guest wellmont]

why does it seem that nobody else other than PW and Canadian pension funds want to "capture the value" between $9 and breakup value? the company has been for sale for 18 months. again this is tailor made for p/e if what you say, that there is substantial upside from $9 to breakup value, has any merit. where are they? p/e nor strategics ordinarily don't get near businesses that are in free fall and incomprehensible. who does? somebody who has a lot of money invested and needs to get that money, or some of it, back. and fast. yes strategics will end up owning the pieces. but at knock down prices from a highly motivated seller. they have no desire to buy the entire mess of an operation.

 

the consortium of pw and ca pension funds do not want this. It's obvious by the way they structured this "bid". And as was stated earlier, PW is all set to let this incredible opportunity go if someone else bids all of $9.25. He negotiated a sweetheart deal for himself that delivers $3 of extra value if somebody tops his non binding stalking horse bid. judging by market reaction nobody seems interested in doing even that. why does he not want to put another penny into the equity of bbry?  He's ready to walk away with $12.25. Now why would he do that if he thought it "highly likely" there is substantial upside from $9? if there was he would not risk letting someone else capture it. He would simply buy the company and be done with it. When Buffett wants a company he puts a bear hug around it.

[txlaw]

why does it seem that nobody else other than PW and Canadian pension funds want to "capture the value" between $9 and breakup value? the company has been for sale for 18 months. again this is tailor made for p/e if what you say, that there is substantial upside from $9 to breakup value, has any merit. where are they? p/e nor strategics ordinarily don't get near businesses that are in free fall and incomprehensible. who does? somebody who has a lot of money invested and needs to get that money, or some of it, back. and fast. yes strategics will end up owning the pieces. but at knock down prices from a highly motivated seller. they have no desire to buy the entire mess of an operation.

 

the consortium of pw and ca pension funds do not want this. It's obvious by the way they structured this "bid". And as was stated earlier, PW is all set to let this incredible opportunity go if someone else bids all of $9.25. He negotiated a sweetheart deal for himself that delivers $3 of extra value if somebody tops his non binding stalking horse bid. judging by market reaction nobody seems interested in doing even that. why does he not want to put another penny into the equity of bbry?  He's ready to walk away with $12.25. Now why would he do that if he thought it "highly likely" there is substantial upside from $9? if there was he would not risk letting someone else capture it. He would simply buy the company and be done with it. When Buffett wants a company he puts a bear hug around it.

 

Let's agree to disagree on this one.

 

I'm a little perplexed though by your viewpoint.  I think you recently said that you were long BBRY.  I would think that would mean that you thought that break-up value is also greater than $9.

[Alekbaylee]

TORONTO - The Globe and Mail reports that Fairfax Financial Holdings Ltd. (TSX:FFH) is seeking more than US$1 billion from other investors to help fund a takeover of BlackBerry Ltd. (TSX:BB).

 

Fairfax said on Monday that it's leading a group that would buy the Canadian smartphone maker but didn't disclose publicly how much other investors would contribute or identify any of its potential partners.

 

The Globe, citing unidentified sources, said that as of Tuesday only one pension fund is seriously considering joining the Fairfax-led consortium — the Ontario Teachers Pension Plan, one of Canada's largest institutional investors.

 

The pension plan declined to comment for the Globe article and has declined to comment on previous reports that link it to deals before they're announced.

 

Fairfax's proposal values BlackBerry at US$4.7 billion but makes a number of conditions that would allow the Toronto-based financial group to walk away from the deal.

 

The Globe report says Fairfax is pitching a deal that would be financed with $3 billion of bank loans, $1 billion of equity from institutions and Fairfax's current 10 per cent stake in BlackBerry, worth about $470 million.

 

http://www.montrealgazette.com/business/Globe+Fairfax+seeking+billion+from+other+investors+BlackBerry/8956533/story.html

[Guest valueInv]

Looms like there might be quite a bit of risk in this deal:

 

http://www.bloomberg.com/news/2013-09-25/blackberry-patents-key-to-raising-buyout-debt-canada-credit.html

[Guest wellmont]

TORONTO - The Globe and Mail reports that Fairfax Financial Holdings Ltd. (TSX:FFH) is seeking more than US$1 billion from other investors to help fund a takeover of BlackBerry Ltd. (TSX:BB).

 

Fairfax said on Monday that it's leading a group that would buy the Canadian smartphone maker but didn't disclose publicly how much other investors would contribute or identify any of its potential partners.

 

The Globe, citing unidentified sources, said that as of Tuesday only one pension fund is seriously considering joining the Fairfax-led consortium — the Ontario Teachers Pension Plan, one of Canada's largest institutional investors.

 

The pension plan declined to comment for the Globe article and has declined to comment on previous reports that link it to deals before they're announced.

 

Fairfax's proposal values BlackBerry at US$4.7 billion but makes a number of conditions that would allow the Toronto-based financial group to walk away from the deal.

 

The Globe report says Fairfax is pitching a deal that would be financed with $3 billion of bank loans, $1 billion of equity from institutions and Fairfax's current 10 per cent stake in BlackBerry, worth about $470 million.

 

http://www.montrealgazette.com/business/Globe+Fairfax+seeking+billion+from+other+investors+BlackBerry/8956533/story.html

 

so it looks like so far one tentative yes from a ca pension fund and pw is not going to put up another dime. not surprised nobody seems to want to do this. they are probably asking, if this is such a great deal PW, why won't you put up any more money?