BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) signed a letter of intent to be acquired by a group led by Fairfax Financial, yesterday. BlackBerry has been offered $4.7 billion in cash, or $9 per share, and the deal is expected to be completed by November 4.
After the announcement of the deal, several analysts have given their opinion on the deal; let’s take a look at some of them.
Fewer chances of other potential bidders, but no surety
Analysts William V. Power, Steven J. Beckert and Andrew T. Flis from Baird Equity research have assigned a Neutral rating to BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) and have raised the price target to $9 ($8 earlier). At present, Fairfax holds 10 percent of BlackBerry’s outstanding stock, which will now be given in the transaction.
The agreement includes a go-shop provision, according to which BlackBerry is free to consider, receive and evaluate other bids from other potential buyers until the time Fairfax concludes its due diligence process.
Analysts believe that there are fewer chances that any other buyer provides a more lucrative offer than the $9 bid, but still there is no surety. Those companies that were said to be potential bidders in the past include Lenovo, Dell and Microsoft Corporation (NASDAQ:MSFT).
BlackBerry may attract a higher price
Analysts Todd Coupland and Robin Manson from CIBC said that the cash value offered to BlackBerry is below their discounted value of BlackBerry’s assets valued at $9.65. CIBC analysts think that chances for another potential bid are 50-50, with Lazaridis-led consortium a possible contender. Analysts think that BlackBerry should be acquired at a higher price.
CIBC has Sector Outperformer rating for BlackBerry with a price target of $12.
Concerns
BlackBerry has been losing millions of subscribers’ quarter over quarter. Baird Analysts do believe that BB10 devices may reverse the trend, but expect the decline to continue in the near term. Further, decline in service revenue will adversely impact margins and earnings per share. BlackBerry 10 device customers do not contribute to the service revenue for BlackBerry as of now.
Android devices are available at strikingly low prices in the developing economies. In recent quarters, BlackBerry has earned significant revenue from the emerging economies, and low priced Android smartphones hold potential to produce hurdle in BlackBerry’s way.
North America proves to be a concern for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) as it represents 25 percent of fiscal first quarter revenue, which is a decline from 28 percent, indicating a surge in competitive threats. BlackBerry will continue to face significant hurdles in North America with Apple and android rolling out new devices.
