Recently, rumors that China's Lenovo Group, the world's largest personal computer maker, might offer to buy BlackBerry have been circulating in the market, Beijing-based IT Time Weekly reports.
Although Lenovo swiftly denied the rumors, could they really make this kind of acquisition?
Benzinga, a financial news media outlet, said an offer worth US$15 a share could come as early as this week, citing an unnamed source familiar with the matter. A Lenovo executive swiftly denied the report, declining to elaborate further.
Rumors about Lenovo's possible acquisition of the Canadian technology company have surfaced several times already.
The Wall Street Journal previously reported that Lenovo and BlackBerry had signed an undisclosed agreement and in January 2013, Lenovo's chief financial officer Wong Ming-wai said BlackBerry is a potential acquisition target, but eventually all related speculation of the merger between the two has proved to be just a speculation, and this time is no exception.
The reason for so much speculation on the deal can mostly be attributed to commentators seeing the deal as a perfect match. Lenovo is the world's largest PC maker which has transformed itself into a PC plus tech firm and has recently established a new company focusing on internet operations. While BlackBerry remains a big international player, despite competition from Samsung. The company is also in possession of lots of patents.
To assess the liklihood of a deal three things need to be examined. The first is whether BlackBerry is looking to sell its shares. BlackBerry has been seeking a buyer and in September 2013, BlackBerry signed a memorandum of understanding with a consortium led by Fairfax Financial, with the latter agreeing to buy BlackBerry for US$4.7 billion, but the plan was abandoned by the company in November 2013.
The second issue is whether Lenovo can afford to buy BlackBerry. Currently, Lenovo has a market value of just over US$10 billion, while BlackBerry has an estimated value of US$4.7 billion. Lenovo doesn't have the capability for quick expansion, as the global PC market is dwindling and the growth of the smartphone market is slowing down. Lenovo's cash flow is tight after it spent US$2.9 billion in acquiring Motorola's mobile business in January 2014, and US$2.1 billion in purchasing IBM's x86 server business on Sept. 29. As of June 30, 2013, Lenovo had a cash reserve of US$3.1 billion.
The third issue is whether the Canadian and US governments will approve the acquisition. The Canadian government may oppose the deal because of national security concerns or if the acquisition doesn't benefit the nation. The US government tends to oppose these kinds of deals due to national security concerns, as lots of government officials and multinational firms use BlackBerry smartphones.
This makes any acquisition very unlikely, the report said.