Lenovo will face obstacles in any BlackBerry deal -source

Reuters

By Nadia Damouni and Euan Rocha

NEW YORK/TORONTO, Oct 17 (Reuters) - Chinese computer makerLenovo, which has signed a non-disclosure deal to examineBlackBerry's books, faces regulatory obstacles if it bids forall of the company and will likely pursue just parts, a sourcefamiliar with the matter said on Thursday.

BlackBerry Ltd said in August it was exploringoptions that could include an outright sale. And the Canadiancompany, which helped pioneer smartphones, has since been linkedwith a string of potential buyers from private equity firms torival technology companies.

Its shares, which rose 4 percent after the Wall StreetJournal first reported the interest from Lenovo Group Ltd, ended up less than a percent at $8.20 on the Nasdaq.

Multiple sources close to the matter have told Reuters BlackBerry is in talks with Cisco Systems Inc, GoogleInc and Germany's SAP AG among others, aboutselling all, or parts of itself. The potential buyers have alldeclined to comment.

None of these technology companies have made a formal bidfor BlackBerry yet. However, industry experts believe that,while these players might not be interested in all ofBlackBerry, they are keen on at least some pieces that wouldmesh well with or expand their own businesses.

Two sources said they expect some of these strategic playersto be paired in bids for BlackBerry, depending on their level ofinterest its hardware and network assets.

Such a deal would be an alternative to a preliminary, $9-a-share offer by a group led by BlackBerry's biggest shareholder,Canada's Fairfax Financial Holdings Ltd. Earlier thismonth, co-founders Mike Lazaridis and Douglas Fregin said theywere also considering a bid.

TOUGH REGULATORY REVIEW

The sale of BlackBerry, or any of its assets will likely undergo tough regulatory reviews in both Ottawa and Washington.

Most security experts believe BlackBerry's most vital asset,a secure network that handles millions of confidential corporateand government emails every day, is likely to be sold to a NorthAmerican entity because of the security concerns. Its lesscontentious handset business, however, could be shopped to anAsian device maker.

Under the Investment Canada Act, the federal government haswide ranging powers to veto any foreign takeover of a Canadianasset or company if it deems such a deal would not bring a "netbenefit" to the country, or if it believes a deal might pose athreat to national security.

Last week, Canada blocked an Egyptian telecommunicationentrepreneur's bid to acquire the Allstream fiber optic networkowned by Manitoba Telecom Services Inc, citingunspecified national security concerns.

Industry Minister James Moore declined comment on the Lenovointerest in BlackBerry.

LENOVO INTEREST

BlackBerry, based in Waterloo, Ontario, virtually inventedmobile email with its first pagers, but it has rapidly lostmarket share to rivals in recent years.

Its latest results highlighted disappointing sales for a newline of devices the company initially saw as its way to win backmarket share from Apple Inc's iPhone and the numerousdevices powered by Google's Android operating system.

And senior Lenovo executives have on more than one occasionexpressed an interest in acquiring BlackBerry, or parts of thecompany, as it would help boost their own smartphone business.

In an interview at the World Economic Forum earlier thisyear, Lenovo Chief Financial Officer Wong Wai Ming toldBloomberg the company would consider a bid for BlackBerry.

Lenovo downplayed the comments at the time, saying that Wongwas speaking broadly about Lenovo's M&A strategy.

A spokesman for Lenovo declined to comment on news of thecompany's renewed interest. BlackBerry said it is conducting athorough review of its alternatives and that it does not intendto disclose further developments until it approves atransaction, or otherwise concludes the review.

The Wall Street Journal said Lenovo was looking at a bid forall of BlackBerry, which includes its faltering hardware unit,along with its security-focused service businesses and a stringof hard-to value patents.

View Comments