BlackBerry Could Sell Waterloo Properties As Possible Rival Bid Emerges

Struggling BlackBerry is reportedly considering selling some of its properties in Waterloo, Ontario to help raise funds ahead of a possible sale of the company to Fairfax Holdings, although it is being suggested that Cerberus Capital Management could be preparing a rival bid.

The smartphone manufacturer is understood to own more than 20 buildings in the area, primarily in two campus-style developments, due to its rapid expansion in the past decade.

However with its fortunes declining and its workforce shrinking, BlackBerry is looking to reduce its costs and raise funds to make itself more attractive to buyers, although it is also possible it is seeking an independent valuation of its properties for its suitors.

BlackBerry fire sale

The Globe and Mail says BlackBerry contacted real estate firms last week, asking them to come up with ideas that would allow it to get as much money from the portfolio as quickly as possible. It is even willing to sell and lease back some of its property, although it wants to keep hold of a number of key buildings.

BlackBerry is apparently the largest occupier of office space in the Waterloo region, which is dubbed Canada’s ‘Technology Triangle’, as it owns and leases 1.6 million square feet – nearly 15 percent of the market.

However such a large amount of space becoming available at one time would flood the market and decrease its value, not least because there is no guarantee the new owners would be able to find tenants, although Google-owned Motorola is opening  a hub in the region and others could follow as companies look to acquire some of the talent let go in BlackBerry’s massive redundancy programme.

Competing bids

Fairfax Holdings is currently undertaking due diligence and is expected to make a final offer by 4 November, although BlackBerry is still seeking alternative buyers. It agreed to a number of unusual terms in its preliminary agreement with Fairfax in order to secure its share price and attract other bids.

BlackBerry could be liable to pay Fairfax a penalty of around £90 million if it now accepts a competing bid, but the consortium does not have financing in place and investors are concerned they may not be offered the full $4.7 billion agreed, leading to a fall in BlackBerry’s share price.

However, if Fairfax offers less than the agreed figure, BlackBerry would not have to pay the penalty, and if its share price continues to fall, other suitors might become interested. The Wall Street Journal reports that Cerberus Capital Management is seeking to sign a confidentiality agreement that would allow it to access BlackBerry’s books.

Cerberus is not one of the investment firms courted by BlackBerry earlier this year and it is unclear how strong the interest is, although it is also believed at least one other group is considering a move, while BlackBerry founder and co-CEO Mike Lazaridis has also been linked with a possible takeover.

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