BlackBerry announced today that it has entered into an agreement to sell all of its non-core patents and patent applications to Malikie Innovations Limited (“Malikie”), for a combination of cash at closing and potential future royalties, in the aggregate amount of up to US$900 million.
Malikie is a a newly-formed subsidiary of Key Patent Innovations Limited, a Dublin, Ireland-based patent monetization company.
The road to this sale has been a long one. In June last year, BlackBerry announced it was no longer under a previously-announced exclusivity agreement to sell its non-core patents to Catapult IP Innovations. The company attributed the retraction to Catapult’s laggard pace in raising the US$600 million needed to complete the deal.
Then another communication from Blackberry in December provided an update on its transaction with Catapult, which indicated that Catapult was working with a financing partner, and that the parties were negotiating definitive closing documents. However, Catapult was again unable to get financing that would have enabled it to complete the transaction on terms acceptable to BlackBerry, and therefore BlackBerry terminated its agreement with Catapult and has instead entered into the patent sale agreement with Malikie.
The transaction with Malikie is not subject to any financing conditions. Funding has been secured from a leading US-based investment firm with in excess of US$30 billion of assets under management.
Under the agreement, BlackBerry will receive US$170 million in cash on closing, and an added $30 million in cash by no later than the third anniversary of closing. In addition, BlackBerry will also be entitled to receive annual cash royalties from the profits generated from the BlackBerry patents, on the following basis:
Eight per cent of the first US$500 million of profits; 15 per cent of the next US$250 million of profits; 30 per cent of the next US$250 million of profits; and 50 per cent of all subsequent profits.
“We’re extremely pleased to have executed this agreement with KPI, whose industry-leading expertise and experience positions them well to realize the patent portfolio’s potential and enhance returns for BlackBerry,” said John Chen, executive chairman and chief executive officer at BlackBerry. “This transaction, once complete, will further strengthen our balance sheet while simplifying our business and enabling increased focus on our core IoT and Cybersecurity opportunities.”
Royalty payments to the company will be capped at US$700 million at first, and are subject to an annual cap increase of an amount equal to four per cent of the remaining portion of the $700 million that has not been paid to BlackBerry as of the date of the increase. Malikie’s costs will also be capped in the calculation of profits generated.
About 32,000 patents and applications, relating primarily to mobile devices, messaging, and wireless networking, will be sold in the transaction with Malikie.
The transaction excludes patents and applications that are necessary to support BlackBerry’s current core business operations. BlackBerry will receive a license back to the patents being sold, and the transaction will not impact customers’ use of any of BlackBerry’s products, solutions, or services, the company said in its announcement.
Completion of today’s transaction is conditional upon, among other things, satisfaction of all regulatory conditions under the Hart–Scott–Rodino Antitrust Improvements Act in the United States and the Investment Canada Act.