Research In Motion: RIM Sale May Find Few Takers
MONTREAL - Research In Motion may not have many suitors at home or abroad especially with Prime Minister Stephen Harper's comments that he would like to see the BlackBerry maker remain a Canadian company, analysts said Monday.
The prime minister recently told Reuters news agency that he wants to see the "company succeed and continue to grow as a Canadian company."
"A hostile takeover is not very likely to go through based on what Harper has said," telecom analyst Troy Crandall said.
But RIM (TSX:RIM) also doesn't seem to have a lot of obvious suitors.
"Any of the potential acquirers for RIM right now seem to either have partnered with somebody else already or bought somebody else," said Crandall of investment firm MacDougall, MacDougall & MacTier.
Harper's comments last week reflect a worry that too many Canadian companies are being swallowed up by foreign buyers and that could eventually harm the economy.
In a wave of consolidation a few years ago, most of Canada's steel industry and major nickel and aluminum producers were taken over by U.S. or global companies.
However, Ottawa blocked the foreign takeover of specialized radar data company MacDonald, Dettwiler and Associates Ltd. (TSX:MDA) in 2008 and stopped the US$40 billion sale of PotashCorp. to the world's biggest miner — Australia's BHP Billiton — in 2010.
The federal government also went to court to fight U.S. Steel's plans to cut jobs at the former Stelco operations in southern Ontario.
After a legal battle, Ottawa got some guarantees from the big U..S. steelmaker on future jobs and investment at Stelco, whose 2007 sale had been approved by Investment Canada.
On Monday, Ontario Premier Dalton McGuinty called for changes to the Investment Canada Act to prevent companies from taking over Canadian factories, then shutting them down and stripping them of their equipmen.
The provincial premier's comments came three days after U.S.-based Caterpillar announced it will close a locomotive plant in London, Ont. after a lockout sparked by a company demand for big wage concessions from the plant's workers.
At RIM, the company has come under pressure from some shareholders to put itself up for sale or dispose of some of its assets — primarily its valuable patents
Elsewhere in the tech sector, Google has bought Motorola Mobility, mainly to get its hands on 17,000 patents and mobile phone company Nokia and software giant Microsoft have partnered to launch the Windows 7 smartphone.
Meanwhile, electronics giant Samsung, which sells Google-powered Android smartphones, has said it's not interested in RIM.
Amazon.com recently approached RIM to discuss a takeover, but a report said the Canadian company rejected the move.
RIM has a stock market value of about $8.6 billion dollars, which would be considered a lot for a Canadian suitor such as a pension fund to buy, Crandall said. A number of pension funds likely would have to band together to make such a bid, he added.
The Canadian tech company could end up being sold off in pieces if its new generation of BlackBerry smartphones, based on the operating system in its PlayBook tablet computer, isn't successful after they're launched later this year, Crandall said.
Benj Gallander, president of Contra The Heard Investment Letter, said Ontario-based Teachers' Pension Plan or the Caisse de depot et placement du Quebec are unlikely bidders.
"They certainly don't have the expertise to take a majority stake and run the company," Gallander said from Toronto.
"If you look at those organizations, they generally don't invest in companies that are having an awful lot of difficulty. The perception of RIM right now is that it's in a lot of difficulty."
The Waterloo, Ont. company recently replaced long-time co-CEOs Jim Balsillie and Mike Lazaridis with its chief operating officer Thorsten Heins in an attempt to turn around its market share and successfully launch the next generation of its BlackBerry smartphones.
RIM has been losing market share in the lucrative U.S. market as consumers and some companies have turned to Apple's iPhone and Google's Android-powered smartphones. Analysts also say RIM's international market share will also start to erode as it faces more competition.
In his interview with Reuters, Harper singled out hostile takeovers and bids for what he described as "critical technology" companies as the ones his Conservative government might block.
In its 2010 decision to block BHP Billiton's hostile bid for PotashCorp (TSX:POT), Ottawa said the takeover would not be a net benefit to Canada.
The MacDonald, Dettwiler friendly deal two years earlier was rejected because the sale of the company's space division to a U.S. defence contractor could have hurt national security interests.
At RIM, Jaguar Financial and more than a dozen other shareholders own about 10 per cent of RIM and have been pushing for a revamped board and a strategic review of the company, which would include a possible sale.
Jaguar chief executive Vic Alboini said he still believes RIM's new chairwoman Barbara Stymiest should carry out a strategic review of the company and consider a sale.
"I think if the federal government wants to put its toe in this water it has to lay out what the guidelines are so there is no uncertainty in the capital market," said Alboini, head of the Toronto-based merchant bank.
"I am not sure we want a government poison pill here," Alboini said of the prime minister's comments.
"Is it something he would consider to be a problem if management of RIM entered into a friendly deal with a foreign acquirer?" he said.
"It raises a ton of uncertainty for potential acquirers whether domestic or foreign because people don't know where the government stands and, therefore, what you're going to do is take out the takeover bid premium out of the marketplace," Alboini said.
"Is that what the government really wants to do?"
Shares in Research In Motion closed down 25 cents, or 1.5 per cent, to $16.53 in trading on the Toronto Stock Exchange.