By RTT News, October 17, 2013, 11:37:00 PM EDT
(RTTNews.com) - Chinese PC maker Lenovo Group Ltd (LNVGY, LNVGF) is actively considering a bid for beleaguered Canadian smartphone maker BlackBerry Ltd. (BBRY, BB.TO), the Wall Street Journal reported Thursday, citing people familiar with the matter. Lenovo is said to have signed a non-disclosure agreement with BlackBerry that will allow it to look at that company's books.
In August, BlackBerry said its board of directors formed a special committee to explore strategic alternatives to enhance value and also increase scale to accelerate deployment of BlackBerry 10.
The strategic alternatives include a sale of the company, possible joint ventures, strategic partnerships or alliances, or other transactions. The push to find a buyer for BlackBerry came after Microsoft Corp. ( MSFT ) agreed to buy the handset unit of Nokia Corp. ( NOK ) for $7.2 billion.
BlackBerry, in late September, signed a letter of intent agreement under which a consortium led by Toronto-based hedge fund Fairfax Financial Holdings Ltd. offered to acquire the company for about $4.7 billion. The deal, which will see BlackBerry go private, came just days after the company announced plans to trim some 4,500 employees by the year end.
The diligence period for the Fairfax deal is anticipated to conclude by November 4, at which time a definitive agreement will be executed and customary regulatory approvals will be sought. However, BlackBerry can actively evaluate and negotiate with other parties for a better offer before recommending the Fairfax offer to shareholders. BlackBerry's founders Mike Lazaridis and Douglas Fregin are also considering a bid for the company.
However, the Lenovo deal is certain to face government scrutiny in both Canada and the U.S. as the company has business with sensitive government departments in both countries. Canada requires any foreign bid for a Canadian company exceeding C$344 million, or $334 million, to pass a government review to ascertain whether the deal is a "net economic benefit" or a security risk to the country.
In January, media reports said quoting a Lenovo executive that the company is looking at various acquisition opportunities, including the purchase of BlackBerry. The executive was speaking on the sidelines of the World Economic Forum's meeting in Davos, Switzerland.
Lenovo, a late comer to the smartphone market, has gained traction in its home market and now ships more smartphones than BlackBerry. Research firm Gartner said in August that Lenovo stood at the fourth position in global smartphone sales for the second quarter and accounted for 4.7 percent of the market share, while BlackBerry's share fell to 2.7 percent.
Gartner noted that Lenovo continues to rely heavily on its home market in China, which represents more than 95 percent of its sales. Further, the research firm noted that it remains challenging for Lenovo to expand outside China as it has to strengthen its direct channel as well as its relationships with communications service providers.
An acquisition of BlackBerry would enable Lenovo to use that company as a way to expand its global brand in smartphones. Lenovo's another significant acquisition came in 2005 when it acquired International Business Machines Corp.'s ( IBM ) PC business for $1.25 billion.
BlackBerry, once a leader in the smartphone segment, fell into hard times after Apple Inc.'s ( AAPL ) iPhones and devices running on Google Inc.'s ( GOOG ) Android platform began to dominate the market. Meanwhile, the sales of two LTE-enabled smartphones introduced by BlackBerry earlier this year - the all-touch screen Z10 and keyboard equipped Q10 - have reportedly fallen below expectations.
In late September, BlackBerry reported a wider loss for the second quarter, partly due to dismal demand for its newest devices. Net loss for the quarter widened to $965 million or $1.84 per share from $235 million or $0.45 per share last year. Revenue for the quarter declined 45 percent to $1.57 billion from $2.86 billion in the same period last year.
BBRY closed Thursday's regular trading session at $8.20, up $0.07 or 0.86 percent on a volume of 22.40 million shares.
LNVGY closed Thursday's trading at $21.21, down $0.36 or 1.67 percent on a volume of 53,787 shares.
For comments and feedback: contact email@example.com