Fairfax Financial Holdings Ltd, which has until tomorrow to firm up its US$4.7 billion bid for BlackBerry Ltd, has yet to arrange financing to take the company private, people with knowledge of the matter said.
Fairfax’s advisers, Bank of America Corp and Bank of Montreal, have been rebuffed by other lenders they contacted to help finance a bid, said the people, who asked not to be named because the process is not public.
BlackBerry gave Fairfax seven weeks to line up the financing, while it also sought competing offers. One potential counterbid could come from Cerberus Capital Management LP, which is teaming up with BlackBerry cofounders Mike Lazaridis and Doug Fregin to explore a deal, one person said. That group also is in discussions with Qualcomm Inc about having the chipmaker join the coalition, said the person.
“Fairfax may not have been able to articulate a business plan,” said Sachin Shah, a strategist in special situations and merger arbitrage at New York-based Albert Fried & Co. That may be the reason its bid has struggled, he said.
Cerberus Capital Management LP, a private-equity firm that specializes in distressed assets, has signed a nondisclosure agreement with BlackBerry for access to its financials, one person said.
Fairfax still may end up pulling together the funds to see its bid through, or it could ask BlackBerry to extend the Nov. 4 deadline, the people said.
Meanwhile, Qualcomm will make a decision about whether to join Cerberus’ effort after reviewing BlackBerry’s finances, one of the people said. The company — the top supplier of chips for phones and tablets — gets the majority of its profit from licensing patents, which cover much of the fundamental technology in wireless networks. A stake in BlackBerry would give Qualcomm access to additional patents as well as mobile phone hardware and software.
Credit Suisse Group AG was one of the banks contacted by Fairfax in search of financing, one of the people said. The bank passed on being part of a group of lenders when it found tepid demand among loan investors, the person said. Banks are reluctant to finance the leveraged buyout of the struggling smartphone maker, which has reported losses for five of the last seven quarters, the people said.
Fairfax president Paul Rivett did not return messages seeking comment.
Fairfax CEO Prem Watsa declined to comment on his company’s bid when asked on an earnings conference call on Friday.
Mike Sitrick, a spokesman for Lazaridis and Fregin, also declined to comment, as did representatives of BlackBerry, Cerberus, Qualcomm and Credit Suisse.
Fairfax, BlackBerry’s largest shareholder, made its US$9-a-share tentative offer on Sept. 23, agreeing to negotiate a “definitive” deal by 5pm tomorrow. The Toronto-based firm has yet to name any partners or say whether it has raised any money for the bid. Fairfax also has not said what will happen if it can not do so.
If BlackBerry strikes a deal with another buyer before tomorrow, it would owe a US$157 million breakup fee to Fairfax. If Fairfax makes a definitive agreement with the smartphone maker, and a better offer comes in after the deadline, the fee would rise to about US$262 million.