BlackBerry deal tests limits on M&A creativity

2 responses

  1. garner says:

    Agreed. Except the write down is for the benefit of all buyers as it effectively drives the share price down and the balance sheet. Re the 9$ price. Other buyers could offer that or less and if they had firm financing it would force PW to prove that the has the financing. In fact if I was a buyer I would offer less but with firm financing and then see what happens. It might save me paying the break fee.
    CIBC did an interesting analysis. $4.7b purchase price but you are getting 2.6b of cash.? How long will that last.? If it’s not going to disappear that means balance of purchase is $2.1 b for the balance of the assets. Of course everyone has a view as to what those assets are worth. I would hope that after severance costs there would be a good chunk of cash left and that the non cash assets have a value in excess of 2.1b. So what this the risk. Could you borrow a billion against the assets. That depends on cash flow. Well after all the layoffs costs decline and it becomes a question of how much revenues decline and how fast Bb can convert the inventory they just wrote down – into cash. Also how solid is service income. One thing I would bet on is that Bb won’t be paying any taxes as I suspect they have a nice big pool of tax losses. So all cash flows might be free of tax. That could be attractive to a buyer who can put in a profitable business that would also be sheltered by the tax losses. All a buyer needs is assurance that the combination of asset value and future tax free cash flows can cover the purchase price And the sooner the better. If you can get the banks to lend a chunk and the pensions to invest a chunk and you had ML in the mix you might have a shot with a manageable downside. But pensions are pretty conservative. If they go for this deal it would be a significant expression of confidence.

  2. Andrew says:

    You nailed it. This seems like an attempt to get someone else to step up, nothing more. If he really wanted the company why not wait another week or two and offer $5? What is stopping him from pulling his bid and lowering it in the next few weeks?

    Nice that Mr. Heins is getting a $55,000,000 payout for his troubles, shareholders must be happy.

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