Home Technology Canadian Government May Reject A Foreign Bid To Buy RIM

Canadian Government May Reject A Foreign Bid To Buy RIM

When you purchase through our sponsored links, we may earn a commission. By using this website you agree to our T&Cs.

Canadian Government May Reject A Foreign Bid To Buy RIM

Last June, Blackberry smartphones maker Research In Motion Limited (NASDAQ:RIMM) reported a first-quarter loss of 37 cents a share, excluding some items, more than five times bigger than what the street expected. Sales crashed 43% to $2.8 billion, missing estimates of US$3.05 billion, while the company said it intended to cut 5,000 jobs. The stock dropped 20 percent the same day.

One analyst’s comment then was: “They either sell, break up the company or die. It is just a question of when.” (Matt Thornton, analyst at Avian Securities LLC in Boston)

No serious moves have been seen towards selling or breaking up the company yet. Does the ‘die’ option still loom large, then? Could Research In Motion Limited (NASDAQ:RIMM) head into bankruptcy?

Valuewalk reported in early July that certain corporate customers of RIM were, indeed, preparing contingency plans in the event of RIM’s demise. Yet Canadian customers are expected to remain longer with Research In Motion Limited (NASDAQ:RIMM) out of national loyalty. In any case, RIM’s bankruptcy could deal a body blow to Canada’s economy – the company is one of the largest employers in the country.

Interestingly, a report by Reuters reveals that the ‘sell’ option above, was very much alive and kicking as far back as March, when Canadian Industry Minister, Christian Paradis, was prepared by his department for a telephonic conversation with new RIM CEO Thorstein Heins, and specifically, how to handle the subject of a foreign takeover bid in case Heins raised it.

According to briefing notes, the Minister was supposed to answer Heins thus: “I examine proposed investments on a case-by-case basis and make my decisions based on the facts and merits of each proposed investment…”.

According to sources, however, Heins did not raise the subject of a foreign takeover of RIM during the call. Yet the incident makes it clear that RIM’s fate was very much a matter of concern for Canada’s Conservative government, led by Prime Minister Stephen Harper, at the time.

Any major takeover of Canadian assets must, by law, be examined for its effects on Canada’s economy, and in the past some deals, notably BHP Billiton Limited (NYSE:BHP) (ASX:BHP)’s bid for Potash Corp./Saskatchewan Inc. (TSE:POT) (NYSE:POT), were turned down.




Our Editorial Standards

At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent.

Saul Griffith

Want Financial Guidance Sent Straight to You?

  • Pop your email in the box, and you'll receive bi-weekly emails from ValueWalk.
  • We never send spam — only the latest financial news and guides to help you take charge of your financial future.