worried Shareholder Objects to BlackBerry's linked ...

TORONTO, Aug. 25, 2020 /PRNewswire/ - Dorsey R. Gardner, a protracted-standing shareholder of BlackBerry restrained ("BlackBerry" or the "enterprise") has issued this press unlock to express his issues over BlackBerry's currently announced recapitalization transactions (the "related celebration Transactions"), which supply rise to a clear conflict of activity as they involve Fairfax economic Holdings constrained and sure of its affiliates (at the same time, "Fairfax"), a connected birthday celebration of BlackBerry, and Mr. Prem Watsa, who isn't handiest Lead Director and Chair of the BlackBerry Compensation, Nomination and Governance Committee (the "CNG Committee"), however additionally Chairman and CEO of Fairfax. Mr. Gardner urges the Board of the company to withdraw the linked party Transactions.

Mr. Gardner is concerned that, amongst different issues, BlackBerry has taken the position that no shareholder approval is required under Toronto inventory exchange ("TSX") and big apple inventory exchange ("NYSE") rules however that the connected birthday celebration Transactions will materially have an effect on control of BlackBerry and may involve the issuance to insiders of entitlements to listed securities improved than 10% of BlackBerry's surprising shares, and, secondly, that BlackBerry purports to have an accessible exemption from minority shareholder approval necessities for a related birthday celebration transaction under Multilateral Instrument sixty one-a hundred and one – protection of Minority Shareholders in particular Transactions ("MI sixty one-101"). In gentle of these concerns, Mr. Gardner has engaged with the team of workers of NYSE, the TSX and the Ontario Securities fee with a view to require disinterested shareholder popularity of the connected party Tran sactions as mandated below the applicable rules of the TSX and the NYSE and beneath MI 61-a hundred and one.

history

BlackBerry announced the connected birthday celebration Transactions by way of press release on July 22, 2020, together with the meant September 1, 2020 early redemption of its 3.seventy five% debentures held by using Fairfax and different minority debentureholders, which have a conversion expense of US$10.00 and are presently "out of the cash" because BlackBerry shares are currently trading under US$5.00. As a part of the related birthday party Transactions, the enterprise will automatically refinance Fairfax's US$500 million fundamental quantity of three.seventy five% debentures by way of a private placement of 1.seventy five% debentures on the identical phrases, apart from the conversion expense will be tremendously decreased to US$6.00. below the phrases of the linked birthday celebration Transactions as in the beginning announced by BlackBerry, Fairfax turned into entitled to raise its share possession to a controlling stake of more than 20% of the current superb shares at a substantial cut price to the three.seventy five% debenture conversion fee of US$10.00. Worse, the business disclosed that the brand new 1.seventy five% debentures aren't redeemable through BlackBerry previous to maturity, making Fairfax's acquisition of an additional 13% of the shares of the company, and the dilution of minority shareholders, pretty much a fait accompli.

In essence, the Board of directors, led by way of Mr. Watsa, put Fairfax in a position to purchase a controlling stake (more than 20%) in the enterprise at a conversion expense that has been dramatically reduced from US$10.00 for the 3.75% debentures, to US$6.00 for the 1.75% debentures.

The company has taken the place that it is going to now not searching for minority shareholder approval of the issuance of the 1.seventy five% debentures, despite the fact that, upon conversion based on the terms of the usual transactions as disclosed by means of press unlock on July 22, 2020, Fairfax stands to increase its ownership position to more than 20%—a transformation in manage that requires shareholder approval under the TSX and NYSE rules. moreover, the issuance of the 1.seventy five% debentures will contain the issuance to insiders of entitlements to listed securities stronger than 10% of BlackBerry's marvelous shares, which additionally requires shareholder approval below the TSX suggestions.   furthermore, the transactions are related celebration transactions that require "majority of the minority" shareholder approval beneath MI 61-one hundred and one.

Shockingly, and in breach of securities legal guidelines, among other things BlackBerry's July 22, 2020 press unlock hid the fact that the linked party Transactions convey a manage block to Fairfax and didn't divulge the particulars of the Board deliberations or any financing options to a transaction with a linked celebration that were considered.

BlackBerry's insufficient Disclosure and mistaken process

Mr. Gardner engaged with the regulators to be able to specific challenge over the insufficient disclosure in regards to the related celebration Transactions and the breach of the necessities to acquire minority shareholder approval beneath the TSX and NYSE rules and under MI 61-one hundred and one. in response to these issues, BlackBerry changed into compelled to give further disclosure (see BlackBerry's August 21, 2020 press release titled "BlackBerry offers additional details involving Proposed Debt Financing").

The August 21, 2020 press liberate exhibits a deeply unsuitable process with regards to the linked party Transactions – in certain, the Board did not correctly constitute an impartial committee to accept as true with the related birthday party Transactions or option financing options accessible to the enterprise, and Mr. Watsa negotiated the transaction without delay with administration who're comfortably beholden to him in his place as the business's Lead Director and Chair of the CNG Committee.

moreover, the August 21, 2020 press release exhibits that no genuine market examine changed into conducted on the topic of financing alternatives. eventually, the click unlock discloses that the enterprise inserted a "blocker provision" in the phrases of the brand new 1.seventy five% debentures, such that Fairfax can't convert above 19.ninety nine% of the normal shares of the enterprise. There may also be absolute confidence this characteristic changed into delivered in direct response to Mr. Gardner's concerns about creation of a new handle block in a bald attempt to "sanitize" the connected party Transactions and confirm that minority shareholders do not get to vote on the related party Transactions. The insertion of the "blocker provision" doesn't accomplish its intended goal, and the related birthday party Transactions nevertheless continue to be subject to shareholder approval under the TSX and NYSE rules and below MI 61-101.

disregard of Minority Shareholders

Why is the BlackBerry Board attempting to force the linked celebration Transactions via in blatant push aside of minority shareholders? Fairfax and Mr. Watsa have a heritage, when introduced with a conflict of hobby, of working in opposition t the hobbies of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec advanced court docket rendered a judgment by which it discovered that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant battle of interest condition" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who have been purchased out at an unfairly low expense. The courtroom also found that regardless of the have confidence and self assurance Fibrek positioned in Mr. Watsa and Fairfax, Mr. Watsa purposely avoided disclosing Fairfax's actual intentions to Fibrek management. 1

In easy of Fairfax's and Mr. Watsa's historical past of misusing their insider positions at a target company for his or her personal benefit and at the cost of minority shareholders, as described in the Fibrek case, how can the BlackBerry Board of administrators facilitate Fairfax's skills acquisition of a controlling stake within the enterprise? There isn't any reasonably priced reply. neither is there a superb business reason behind issuing the brand new 1.75% debentures. The pastime expense is well above the ten-yr executive cost, the company's money stream is wonderful and it has over $300 million in unrestricted money on its steadiness sheet. well-nigh, the new debentures are an almost risk-free mortgage for Fairfax with an fairness kicker at a discounted rate. If administration and the Board really agree with that the enterprise would improvement from more suitable liquidity, they could pursue an extra source of financing, even though at a cost larger than 1.75%, that would be preferable than facilitating Fairfax's abilities acquisition of BlackBerry at a discount fee, and at titanic dilution to minority shareholders. 

source Dorsey R. Gardner