The value of BlackBerry
Analysts are all over the map today as to what BlackBerry Ltd. is worth, and whether shareholders can expect to see more than the $9 (U.S.) a share proposed by Fairfax Financial Holdings Ltd.
Some believe it’s worth more, and some less. Some expect no better offer to emerge, while others say there’s a 50-50 chance.
As The Globe and Mail’s Tara Perkins, Tim Kiladze, Jacquie McNish and Sean Silcoff report, Fairfax has signed a letter of intent worth $4.7-billion if a deal goes ahead. It proposed a Fairfax-led consortium to take BlackBerry private in the midst of a stock meltdown sparked last Friday by an anticipated quarterly loss of almost $1-billion and a big retreat from the consumer market.
Forbes magazine says the proposed sale to Fairfax is seen as a “raw deal” for BlackBerry investors. It quotes Kevin Stadtler of Stadtler Capital, who sold his 60,000 BlackBerry shares earlier this year, and thus no longer has skin in the game.
Still, Mr. Stadtler slammed the proposal as a “fire sale” to Fairfax.
“Ultimately the board of directors and the executives are responsible to maximize shareholder value and how have they maximized value by this transaction?”
What do the analysts say?
Todd Coupland of CIBC World Markets believes the company, which also holds valuable patents and is sitting on $2.6-billion of cash, is worth about $3 more than Fairfax proposes to pay.
“Our view is a takeover for BB is inevitable and that it should come at a higher price,” said Mr. Coupland said in a research report.
“Our price target of $12 is based on a sum of the parts analysis.”
He believes that the “discounted value” of BlackBerry’s assets is $9.65, excluding the company’s cash.
“Our view is this offer is the first but not the final one,” he said, adding that the chance of another bid is 50-50.
“Potential bidders might include a Lazaridis-led consortium. The Fairfax bid could also very well attract other ‘strategic’ [original equipment manufacturers] who up until now had time on their side and could wait for a ‘more attractive’ price.”
Mr. Coupland was referring to Mike Lazaridis, who founded what was then Research In Motion Ltd. and is rumoured to be trying to put together a bid with private-equity players.
Analyst Steven Li of Raymond James isn’t so sure, valuing BlackBerry at as low as $6 and as high as $13.
“While this offer is to some extent opportunistic, it also reflects BBRY’s dwindling options and little leverage,” Mr. Li said, referring to the company by its U.S. stock symbol.
“On the other hand, this [letter of intent] from Fairfax consortium also forces interested parties to make their move,” he added in his research report.
“In our [sum of the parts] analysis, assuming $1-billion to wind down operations, we see a valuation range between $6-$13/share depending on how much value you place on BBRY services revenue and how drawn out a process it is (operating losses in the meantime).”
For sure, this saga is far from over.
As Streetwise columnist Boyd Erman writes today, the proposed rescue by Fairfax looks frail, at best.
The letter of intent is sprinkled with so many ifs, ands and buts that it’s anything but a done deal.
Fairfax will spend six weeks going through the books before committing. There’s also the issue of the proposed consortium, and then the financing.
- Tara Perkins, Tim Kiladze, Jacquie McNish and Sean Silcoff: Fairfax hands BlackBerry $4.7-billion lifeline
- Boyd Erman in Streetwise (for subscribers): Fairfax's BlackBerry rescue: Fairfax's BlackBerry rescue: An illusion at best?
- Tara Perkins and Jacqueline Nelson: Watsa surprises again by riding to BlackBerry's rescue
- The BlackBerry deal: 'This is a take-under but at least they got one bid'
- Scott Barlow in ROB Insight (for subscribers): BlackBerry valuation hinges on patents, services
- Tim Kiladze in Streetwise (for subscribers): Why the timing of BlackBerry's buyout is crucial
- BlackBerry reels: Stock gored after shocking loss, BBM mishap
- Omar El Akkad: BlackBerry's last stand: A big bet on corporate buyers
- Sean Silcoff and Omar El Akkad: BlackBerry takes huge loss as sales collapse
Floating out there today is the suggestion that the collapse and rescue of BlackBerry is a matter of national pride in Canada.
Says The Financial Times, for example: “We should not underestimate the role national pride is playing in the move by a consortium of Canadian investment companies led by Fairfax Financial to take BlackBerry private in a $4.7-billion leveraged buyout.”
And, of course, there are the inevitable comparisons to Nortel Networks, which so famously flamed out.
That’s like saying Britain somehow should be ashamed of the fact that a Canadian heads the Bank of England. And another, the Royal Mail. Or that Finland should be particularly troubled that a Canadian until recently headed Nokia. (Okay, bad example, that last one.)
Canadians don’t define themselves by who owns their companies. We’re not crowing about the fact that Hudson’s Bay Co. is buying Saks. We may want to shop there, but we don’t much care who owns it. Nor do we care that HBC itself was turned around by an American.
The proposed rescue of BlackBerry is about keeping alive the company that gave the world the smartphone, savings jobs that can be saved, and, for Fairfax Financial Holdings Ltd., protecting its 10-per-cent investment in the company.
We’re in a new era. This isn’t about the Canadian flag. Nor is the Microsoft-Nokia deal about Finland’s national pride.
China buys into potash concern
Enough about BlackBerry. Let’s talk potash, that other Canadian icon.
In a move that promises to affect Canadian interests, China is grabbing a 12.5-per-cent stake in Russian potash giant OAO Uralkali.
Uralkali is the company that pulled out of the Russian potash cartel, leaving North America’s Canpotex as the major group and driving down the stock prices of potash-related companies as investors anticipated lower prices.
Today, Uralkali announced that Chengdong Investment Corp., part of China Investment Corp., is swapping bonds for stock in the company.
That’s a signal of China’s interest in, and need for, potash, and in this way it can help influence prices in major contract negotiations.
- China gets stake in Russian potash giant to secure supply
- Brenda Bouw: Agrium increases dividend, lowers outlook
Retail sales rise
Gas stations – those places we love to hate when we look at the price at the pump – helped boost retail sales in Canada in July.
Sales among retailers climbed 0.6 per cent, having been on an upward trend this year, Statistics Canada said today.
Eight of the 11 sectors measures posted increases, representing more than half of the total action across the country.
That was led by an increase of 3.2 per cent at gas stations.
“Higher prices at the pumps and more volume sold contributed to the increase,” the federal agency said.
“This was the third consecutive month of higher sales at gasoline stations.”
Shoppers in Ontario and Quebec led July’s charge, while sales inched up just 0.1 per cent in Alberta, where consumers had been expected to restock their shelves after the summer floods.
"In provincial terms, Ontario and Quebec were the biggest winners, with the latter likely benefiting from the end of the construction strike," said Emanuella Enenajor of CIBC World Markets. "In contrast, Alberta’s mere 0.1-per-cent increase suggests the post-flood 'bounce-back' to retail sales may not have been all that great."
Streetwise (for subscribers)
ROB Insight (for subscribers)