BlackBerry sale to Lenovo killed after firm no from Ottawa

BlackBerrytried to sell itself to Chinese computer giant Lenovo last year.But CBC News has confirmed the company got a firm no when itapproached the federal government to find out if the bid would be approved.

At the time, the company was told that either Chinese orRussian investment would be met with stiff opposition.So itabandoned the sale.

But it turned out there was something Ottawa could do to help the beleaguered company.BlackBerry received an early Christmas present from the federal government, courtesy of a remission order a $696million US ($767 million Cdn) early payment of part of its tax refund.

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The infusion was a boon to the company,which at the time was burning through its cash reserves and attracting investors who were betting big money it wouldfail.

Another rough year for BlackBerry

Last year was one of crisisfor the company, which saw the launch of its much-anticipated Z10 and Q10phones. But thatlaunch was a flop, forcing the company to take huge writedowns onunsold products and report losses that saw itburnthrough its previously flush cash reserves.

"It was snowballing pretty out of control," says PeterMisek, aBlackBerryanalyst and managing director withJefferies."Within the company, within Waterloo, there was devastation and there was gleeamongstshort sellers.

"It was kind of sad because thousands of people stood to lose their jobs."

In August of last year, the company put itself up for sale. It was at that timeLenovo, among others, started kicking the tires, inquiring about a potential sale. When BlackBerry asked the federal government whether the deal would be approved, Ottawa said no and the possible salewas quickly and quietly killed.

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By Sept.20, when the company announced it would lay off 40 per cent of its staff, its cash reserveshad plunged to $2.6 billion US, $500million lower than they were justthree months earlier.

At that rate, the company would have been out of money in about a year, as the market was rapidly losing confidence and consumers seemed hesitant to buy new phones from acompany seemingly on the way out.

Cash reserves rebounded

By the end of the year, however, BlackBerry'scash reserves had rebounded, and were sitting at $3.2 billion US.

That wasin large part due to the backing of one investor PremWatsa of Fairfax Financial, who organized a $1-billion US financing effort and brought turnaround expert John Chen on as the company's new CEO.

But another huge chunk of cash $696 million US came froman early payment of its spring tax refundby both the federal and Ontario governments last November, in what's called a remission order.

According to BlackBerry'spublicly available management discussion and analysis filing, during the third quarter the company "took steps to accelerate the receipt of a portion of the tax refund to which it is entitled".

It arranged with both levels of government to receive the majority of its tax refundahead of time, and receive the remainder, which BlackBerry estimates at $170 million US ($187 million Cdn), later this year.

According to Misek, that extra payment had a massive impact, saying"it might have saved the company we might look back in a year or two, whatever BlackBerry becomes, and say that was the day they saved the company".