Fairfax Financial Holdings is struggling to raise financing for its $4.7 billion (about R48 billion) bid for struggling BlackBerry, with several large banks declining to participate on concerns that the smartphone maker will not be able to reverse its fortunes, according to people familiar with the matter.
Fairfax, which is run by Canadian financier Prem Watsa, is working with Bank of America Merrill Lynch and BMO Capital Markets to put together a lending syndicate for a deal, but they have been turned down by several large lenders, the sources said.
Bank of America Merrill Lynch and BMO both have deep pockets themselves, and it is still possible they will muster the necessary financing for Fairfax to submit a definitive bid.
Fairfax, the largest shareholder in BlackBerry with a 10% stake, reached a tentative $9-per-share deal with BlackBerry in late September, and has until tomorrow (4 November) to negotiate a definitive agreement.
Several other potential bidders are also mulling participation in BlackBerry's future. The deadline for them to submit bids for the company is also tomorrow.
Fairfax and BlackBerry declined to comment.
The difficulties Fairfax has had in raising financing underscore the fading relevance of BlackBerry, which once pioneered on-the-go e-mail but has bled market share to Apple's iPhone and devices using Google's Android software in recent years.
Should Fairfax fail to put together a bid for BlackBerry, a deal could still be possible with other technology companies in the sector. BlackBerry founders Mike Lazaridis and Douglas Fregin have also declared their interest in buying BlackBerry.
Lazaridis and Fregin are working to submit a joint bid with private equity firm Cerberus Capital Management, a person familiar with the matter said on Friday. Chipmaker Qualcomm may also join the bidding group, that person added.
It was not clear whether Lazaridis and Fregin would overcome the financing hurdles that Fairfax faces. Cerberus and a spokesman for the two founders declined to comment, while Qualcomm did not immediately respond to requests for comment.
Buyout talks
BlackBerry also remains in discussions with several technology companies about a deal, the people familiar with the matter said this week, asking not to be named because the matter is confidential.
The company's advisers are looking to pair up the technology companies that are pursuing different parts of BlackBerry, which include hardware, operating systems, patent portfolios and network assets, the people said.
BlackBerry has held talks with a number of companies, including Cisco Systems, Google, SAP AG, Lenovo Group, Samsung Electronics, LG Electronics and Intel, about selling part or all of itself, Reuters previously reported.
Some of these companies, including SAP, have since walked away from the deal, although the situation is fluid and there is possibility that interest may be renewed, two people said. A SAP spokesman said BlackBerry did not fit with the company's strategy.
Watsa's bid
In a 25 September interview with Reuters, Fairfax CEO Watsa, often described as Canada's answer to Warren Buffett, said he was confident his consortium could find the money needed to fund their bid.
However, the proposal has met with rising skepticism as BlackBerry's prospects continued to darken. The company in September reported a quarterly loss of nearly $1 billion after taking a writedown on unsold Z10 phones.
Adding to the company's woes, it's likely to burn through almost $2 billion of its cash pile in the next year-and-a-half, Bernstein analyst Pierre Ferragu wrote last month.
Canada's top pension funds, widely considered to be among the most likely backers of Watsa's proposal, declined to comment. However, some of their influential heads have already publicly indicated they are unlikely to play any role in a bid for BlackBerry.
"No one has really committed themselves to any group because none of the people that have been circling around BlackBerry have come up with a very convincing business plan," Alberta Investment Management head Leo de Bever said on BNN Television, earlier this week.
The head of Caisse de Depot et Placement du Quebec, Canada's second-largest pension fund, told Bloomberg last month that the Caisse was also unlikely to invest in BlackBerry, as it prefers investing in more predictable businesses such as Coca-Cola and Colgate-Palmolive.
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