Could Blackberry Be Sold for a Premium?
|Written by GSCR Staff|
|Tuesday, 13 August 2013 07:34|
We have highlighted the company formerly known as Research in Motion, now Blackberry (NASDAQ – BBRY - $10.78) several times as the company has gone through some serious trials and tribulations both from a stock and company perspective. Each time we were pretty negative on the shares despite the fact that we felt that it was a takeover candidate.
Today, management seems to have finally recognized they cannot go it alone, given the uphill battle against the likes of Samsung and Apple (NASDAQ – AAPL). As a result, management is considering the option of selling the company, following poor sales of the savior product the Blackberry 10.
In our view, if BBRY is truly a takeover candidate, it could be acquired at a 30-304% premium to current prices. The market cap, sitting at about $5.5 billion, is roughly 2x the Company’s net cash position and although losses are projected going forward, even a 30-40% premium on the shares would mean that the true buyout price would be in the $5-6B range. Considering there is still a great deal of IP here, other handset makers, or wireless players could scoop it up for a reasonable price. Revenue is still expected to be north of $12B, despite the Firm’s difficulties.
There clearly is a split on Wall Street with regards to BBRY’s future. Yesterday, it was announced that several large shareholders which include Canadian institutional firms Fairfax and Alberta Investment Management have begun to ‘explore’ strategic ways to sell the company. This does not mean a sale premium is guaranteed. Still, we believe that event is likely and would accumulate shares or buy long term out of the money calls in anticipation of such a transaction.
Have a great day.
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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