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Private equity firm may look at BlackBerrys books

TORONTO A New York-based private equity firm is interested in taking a look at BlackBerry's books as a prelude to a possible bid for the troubled smartphon e company. Citing unnamed sources, the Wall Street Journal reported Wednesday that Cerb erus Capital Management aims to sign a confidentiality agreement to access Bla ckBerry's financial information. However, the move is no guarantee that the New York-based firm, a specialist in investing in distressed companies, would actually make an offer for BlackBerry. BlackBerry shares rose in response to the report, gaining about one per cent, or eight cents, to close at $8.27 on the Toronto Stock Exchange. Earlier on Wednes day, BlackBerry shares had fallen as much as 44 cents a share. BlackBerry declined to comment on the Journal's report. A spokesperson said th at "we do not intend to disclose further developments with the respect to the pr ocess until we approve a specific transaction or otherwise conclude the review of strategic alternatives." Cerberus, a specialist in investing in distressed companies, has a long relationsh ip with Canadian companies and in 2004 helped rescue Air Canada from bankru ptcy. In 2008, Canadian Imperial Bank of Commerce sold part of its structured credit portfolio to Cerberus in a $1.05-billion US deal as it backed away from exposure to the U.S. residential mortgage market. BlackBerry, in the midst of financial strife that has eroded the reputation of the company and its share of the smartphone market, announced last week that it h as agreed to a conditional takeover offer from Toronto-based Fairfax Financial t hat values the company at $4.7 billion US. Fairfax has until Nov. 4 to finalize the deal. Late Tuesday, BlackBerry filed documents with the U.S. Securities and Exchange Commission which said that uncertainty over its strategic review process "may have negatively impacted demand for the company's products." BlackBerry stopped providing specific data for its subscriber base earlier this ye ar, saying that it no longer accurately reflects its business model. However, the c ompany has confirmed that "customers" continued to decline in the second qua rter in every region except the Asian-Pacific market. BlackBerry also said the cost of reworking its operations will likely be four times

as much as it estimated earlier this year rising to at least $400 million US bef ore the end of May 2014. Those expenses will cover costs associated with the previously announced layof fs of 4,500 employees, the reworking of its smartphone lineup and other change s to its manufacturing, sales and marketing operations, it said. The company has also launched an initiative to sell certain unnamed assets its c onsiders "redundant'," including properties, as well as plants and equipment, th ough the company did not identify anything specific. For the second quarter, BlackBerry said it booked a loss of $7 million related to the declining value of those assets. The Globe and Mail reported Wednesday that BlackBerry has asked real estate fi rms to suggest ways for tapping the value of its properties in the Waterloo area, about 20 buildings. Its sources said that BlackBerry has asked for ideas to generate the largest possi ble return from its real estate in as little time as possible, through a confidential process begun last week. BlackBerry responded to the Globe with an email that said it reviews its real est ate on an ongoing basis. "Should space become unnecessary for BlackBerry's co ntinued use, we will work with key partners in the community who may need so me of our surplus space," the email said. Last week, the company booked a $965-million US loss for the second quarter a nd announced the massive layoff that will extend into next year. "Other charges and cash costs may occur as programs are implemented or cha nges completed," the company said in the financial documents. BlackBerry operates out of 27 buildings in Waterloo Region, 21 of which are ow ned by the company and six of which are leased. Its corporate, administration a nd finance operations are housed in a campus of four buildings in the north en d of Waterloo, near Northfield Drive. The company owns two buildings in Cambridge, totalling 734,293 square feet, th at are used for logistics and repair services. BlackBerry is by far the largest user of office space in Waterloo Region. Accordin g to real estate firm Colliers International, BlackBerry's portfolio of office space i n totals 1.6 million square feet, which represents about 15 per cent of the total office market in the region.

"BlackBerry has always been a very big fish in a relatively small pond," Karl Inna nen, the firm's managing director for Waterloo Region, says in a report posted o n the Colliers website after Fairfax Financial's bid for BlackBerry was announced last week. "However, there are extremely successful companies in Waterloo Region that ne ed more space and have been overshadowed in recent years. The real estate co mponent could be an opportunity." With files from Record staff and news services