Samsung talks to BlackBerry about $7.5 billion buyout
NEW YORKJan 16, 2015 - 12:00 am GMT+3
Jan 16, 2015 12:00 am
Although both companies deny report of takeover talks, Samsung is said to be in talks to make a takeover offer for Blackberry according to a person familiar with the matter and documents seen by Reuters
Samsung Electronics recently offered to buy BlackBerry Ltd for as much as $7.5 billion, seeking its valuable patents as it battles Apple in the corporate market, according to a person familiar with the matter and documents seen by Reuters. South Korea's Samsung proposed an initial price range of $13.35 to $15.49 per share, representing a premium of 38 percent to 60 percent over BlackBerry's current trading price, the source said on Wednesday. Representatives from the two companies, which are working with advisers, met last week to discuss a potential transaction, the source said, asking not to be identified because the conversations are private.
The Waterloo, Ontario-based company said in a statement that it "has not engaged in discussions with Samsung with respect to any possible offer to purchase BlackBerry. Shares of BlackBerry, which soared nearly 30 percent following the Reuters report, fell back about 15 percent in after-hours electronic trading following the statement. Samsung also told Reuters in Seoul that it has no plans to acquire Blackberry. "Media reports of the acquisition are groundless," a company spokeswoman said.
Separately on Wednesday, Canadian newspaper Globe and Mail reported BlackBerry has shunned a handful of takeover overtures in recent months as its board and largest investor think its restructuring strategy will deliver greater shareholder value than current acquisition offers. The board believes offering prices, some in excess of $7 billion, fall well below BlackBerry's potential asset value in the next few years, according to the Globe and Mail report. BlackBerry, a one-time investor darling that pioneered smartphones, has regained some of its lost swagger under Chief Executive John Chen, who is leading a bid to regain market share it has lost to Apple Inc, Google Inc and Samsung.
"BlackBerry is in such transition today, so any investment has been a bet on the future, so at this point Samsung is cutting in before that full future becomes a reality," said Morningstar analyst Brian Colello.
Samsung's strength as the No. 1 global smart phone marker has been built on making devices for the consumer market, which has become crowded in recent years. With a takeover of BlackBerry, Samsung could make greater inroads into the corporate market, where it has trailed rivals. BlackBerry still holds considerable sway among enterprise clients for its strong security features - with U.S. President Barack Obama still using one of the company's devices after taking office. "How many Samsung phones do you see in offices? This would be Samsung's chance to get into the enterprise," said BGC Partners analyst Colin Gillis. Any tie-up with Samsung would require the blessing of Prem Watsa, whose Fairfax Financial Holdings Ltd is a major Blackberry shareholder. Fairfax helped bankroll a debt recapitalization that led to Chen's arrival in November 2013 as CEO. The bid would also face regulatory scrutiny in both Ottawa and Washington. Under Canadian law, any foreign takeover of BlackBerry would require government approval under the Industry Canada Act. BlackBerry's secure networks manage the email traffic of thousands of large corporate customers, along with government and military agencies across the globe. BlackBerry announced a high-profile security partnership with Samsung in November. The partnership will wed BlackBerry's security platform with the South Korean company's own security software for its Galaxy devices.
About the author
Research Associate at Center for Islam and Global Affairs (CIGA) at Istanbul Sabahattin Zaim University