BlackBerry’s $600 million sale of 38,000 of its patent assets remains in limbo today following the Canadian company’s announcement that the mooted buyer of the portfolio, Catapult IP, has yet to secure the financing to complete the transaction.
In a press release published before markets opened in the US, BlackBerry stated: “Catapult continues to work on securing its required financing and BlackBerry looks forward to the completion of the Patent Sale Transaction. However, BlackBerry is no longer under exclusivity with Catapult and, given the length of time that the transaction has taken, BlackBerry is exploring alternative options in parallel.”
BlackBerry announced in late March that US and Canadian government regulators had cleared the sale, a major milestone. However, along with that news the company noted that Catapult IP Innovations, led by York Eggleston IV, still had to meet closing conditions including financing.
Catapult agreed to a $600 million price for BlackBerry’s 38,000 legacy patent portfolio, which included assets covering social media and messaging, enterprise security, enterprise collaboration and consumer voice and security technologies. The buyer agreed to an initial $450 million payment, followed by instalment payments.
Of the $450 million payment, $400 million was a conditional loan. Catapult also needed $90 million in equity financing to draw on the conditional debt and complete the acquisition. BlackBerry had a right to terminate the sale if the financing did not come through by the end of May.
BlackBerry’s royalty revenues have been minimal as it worked through the sales process and paused licensing activities. For the company’s 2022 fiscal year, which ended 28 February, it earned $63 million from licensing, a 77% decrease from the $272 million generated in its 2021 fiscal year.
Whether Eggleston is now in a position to finalise the deal remains to be seen. If he cannot, the Canadian company’s options include rethinking a sale entirely and building an aggressive, internal, licensing operation, almost certainly targeting the companies that Catapult IP would have chosen to go after. That, though, will be an expensive undertaking, requiring a great deal of time and upfront monetary investment.
Alternatively, the company can look for a different purchaser. However, that may prove tough to do for a sum close to $600 million. IAM understands that the Catapult bid was substantially higher than any other that BlackBerry received when it was looking for buyers. What’s more, the regulatory process – including clearance from the Canadian government, which is thought to require a home town element to any purchase deal - would have to be gone through once more. Put these two factors together and it would leave CEO John Chen facing the double whammy of a potentially much lower sale price to be secured at an unknowable time in the future.
Bearing all this in mind, Chen and his boardroom colleagues will almost certainly be fervently hoping that Eggleston and Catapult still come through. If they don't, BlackBerry investors are unlikely to be impressed.