Fairfax's BlackBerry deal seeks to forgo Canada takeover review

Tue Sep 24, 2013 2:32pm EDT
 
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By Randall Palmer and David Ljunggren

OTTAWA, Sept 24 (Reuters) - The investor that has struck a tentative $4.7 billion deal to take smartphone maker BlackBerry Ltd private is aggressively touting his group's Canadian status to avoid the government reviews of foreign takeovers that have plagued recent attempts to buy Canadian companies.

The $9 a share proposal, from an as-yet unidentified consortium led by Canadian investment guru Prem Watsa's Fairfax Financial Holdings, was announced on Monday. That was the first working day after BlackBerry shares dived after the company warned of an almost billion-dollar quarterly loss and announced it was laying off more than a third of its workers.

"Our proposal offers a high level of certainty of regulatory approval," Watsa, chief executive of Fairfax Financial, said in a letter to BlackBerry that described the consortium he is setting up to buy the company as "a Canadian buyer not subject to Investment Canada review" and dismissed the idea of antitrust concerns.

Canadian laws give the government the right to review a range of takeovers, including ones that could threaten national security or put the buyer in an excessively strong competitive position.

The Investment Canada Act says foreign takeovers over a certain size must be of net benefit to Canada, a vague concept that the government used when it blocked the biggest takeover of 2010, the $39 billion bid by global miner BHP Billiton Ltd for Saskatchewan-based fertilizer producer Potash Corp .

Gus Van Harten, an associate professor at Toronto's York University and an expert on the Investment Canada Act, said he assumed Watsa was "referring to this being structured in a way so that it's a Canadian takeover of a Canadian company".

Watsa told the Globe and Mail newspaper on Monday that a significant portion of the money for BlackBerry would come from Canada.

The rejection of the BHP bid, along with a lengthy and painful approval process for takeovers of Canadian energy companies last year by Chinese and Malaysian state-owned enterprises, have prompted questions in the investment community about whether Canada is really open to foreign business.   Continued...