BlackBerry, Lenovo Deal Shut Down By Canadian Gov't: Report

By Michelle Maisto  |  Posted 2013-11-05

BlackBerry, Lenovo Deal Shut Down By Canadian Gov't: Report

Lenovo very seriously pursued a deal to purchase BlackBerry, but the Canadian government shut down the talks, The Globe and Mail reported Nov. 4, citing sources familiar with the situation.

"Ottawa made it clear in high-level discussions with BlackBerry that it would not approve a Chinese company buying a company deeply tied into Canada's telecom infrastructure," said the report, adding that the government made its position clear over the last month or two.

In January, Lenovo Chief Financial Officer Wong Wai Ming told Bloomberg that Lenovo was always "looking at all opportunities," including BlackBerry and others.

The company soon after back-pedaled from the remark, saying it was taken out of context. But in October, Lenovo was again said to be in talks with BlackBerry and according to Reuters had signed a nondisclosure agreement, giving it access to a look at BlackBerry's books.

"Because Ottawa made it clear such a transaction would not fly, it never formally received a proposal from BlackBerry that envisioned Lenovo acquiring a stake, sources said," the Globe and Mail reported.

"If the Canadian government hadn't nixed Lenovo's BB bid, the U.S. and U.K. governments almost certainly would have later in the process," Ovum chief telecoms analyst Jan Dawson Tweeted Nov. 5.

He Tweeted again two minutes later, "If you think the kinds of people, companies and orgs that use BlackBerries would be comfortable with Chinese ownership you're nuts."

BlackBerry announced in August that it was open to "strategic alternatives," and in September signed a letter of intent with Fairfax Financial Holdings, its largest stakeholder. Fairfax planned to pay $4.7 billion for the company, take it private and clean house behind closed doors.

On Nov. 4, the deadline for due diligence on the deal, BlackBerry announced a new strategy. Fairfax and other unnamed investors were putting up a $1 billion investment in BlackBerry in exchange for the right to purchase a 16 percent share—a deal that effectively valued that company at a $6.25 billion, analyst Jack Gold wrote in a Nov. 4 research note.

BlackBerry, Lenovo Deal Shut Shown By Canadian Govt': Report

Gold also called the new deal a "very positive step" and said he expects to see "significant redirections" at BlackBerry over the next six to 12 months as "the new management takes hold and new business priorities and directions emerge."

Online, New Doubts About Security

In an Oct. 25 report about the National Security Agency's (NSA) spying scandal and how "everybody else does it, too" isn't a working excuse anymore, The New York Times noted that should Lenovo be allowed to buy BlackBerry, President Obama would almost certainly lose the BlackBerry he'd fought to hang on to when he first came into office.

The Times piece described the "digital age" as offering new ways for nations to do what they'd always done—and for the "Europeans, the Chinese and other powers to replicate NSA techniques."

It added that Chinese hackers have worked their way into the Pentagon, even acquiring the blueprints for the F-35, the world's most expensive fighter jet.

A former American intelligence official was quoted as saying that the Russians are far more patient spies, and so they don't get caught as often as the Chinese.

While Dawson isn't at all shocked, some people likely are.

The U.S. government allowed Lenovo to purchase IBM's PC business in 2005 for $1.25 billion; at the time, it was one of the largest acquisitions ever of a U.S. company by a Chinese company. Today, Lenovo has a major sales and research headquarters in North Carolina, and it recently completed the construction of a manufacturing facility there.

While certainly a Lenovo bid would have been thoroughly examined, many expected it could at least succeed to the point of becoming a bid.

Lenovo executives may be comforted by the thought that many believed BlackBerry an unnecessary acquisition for company, which is both the world's top-selling PC maker and a successful smartphone maker in China.

"Lenovo doesn't need to take on all the baggage and investment to then break its teeth on Android and iOS," Endpoint Technologies Analyst Roger Kay told eWEEK, after the second round of Lenovo-BlackBerry rumors. "Why buy the fourth platform, which is in decline, and try to shore it up? Sand through their fingers."

Follow Michelle Maisto on Twitter.

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