RIM extends buyout offer as Certicom fights back

Research In Motion Ltd. said Wednesday it would extend the deadline for its bid to take over Certicom Corp. as the corporate fight between the two Canadian technology companies heads to court.

RIM, maker of the popular BlackBerry mobile communications device, said it will push the expiry date for its $1.50-a-share offer for Certicom until Jan. 27. The original bid was scheduled to lapse on Jan. 12.

Certicom, however, launched a legal action in Ontario Superior Court to stop the takeover. That proceeding is scheduled to be heard on Jan. 9.

RIM said it extended the offer in order to let the Ontario court hear Certicom's action.

Three-month stock chart for Certicom Corp.

Mississauga-based Certicom also has asked the Ontario Securities Commission to halt the takeover although no date has been set for that hearing.

In response, RIM said it would ask the OSC to invalidate Certicom's existing shareholder rights' plan, a financial device that allows for the issuance of new stock in order to frustrate corporate buyouts.

The sparring begins

Companies often extend takeover offers, either because the extra time is needed to convince recalcitrant shareholders to submit their stock or, as in the RIM-Certicom case, to allow legal proceedings to take place.

In early December, RIM made its $66-million offer for Certicom, which owns patents to some lucrative encryption software and has contracts with the U.S. government.

At the time, RIM said merging the two companies made sense in terms of extending Certicom's global reach through RIM's distribution network.

"Certicom is a natural fit for RIM," said Jim Balsillie, RIM's co-chief executive officer.

Two sides to the story

In fact, RIM said it had been talking to Certicom since early 2007 about a possible deal and only launched the hostile takeover attempt after the target's management refused to entertain any offer.

Three-month stock chart for Research In Motion Ltd.

For its part, Certicom said RIM violated confidentiality agreements that the two companies had by using information gathered in past dealings as the basis for its evaluation of Certicom's business prospects.

In addition, RIM's bid of $1.50 a share was "inadequate and not in your best interests," Certicom told shareholders in a letter dated Dec. 19 arguing against the deal.

Certicom said the company has $0.91 a share in cash and cash equivalents on its balance statements and another $1.07 a share in tax losses that RIM could use to shelter its own profits.

"Essentially, RIM is attempting to acquire almost $2 in cash and potential tax benefits for $1.50, and would not be paying fair value for the valuable assets and operations of your company," Certicom said in the Dec. 19 letter.

Certicom's shares have traded between $1.60 and $1.90 a share since the takeover offer was made on Dec. 3. On Dec. 2, Certicom's stock closed at 85 cents a share.

The stock of a takeover target often trades at a value higher than the bid price as some equity speculators are willing to bet, in this case, between a dime and 30 cents that another suitor will enter the fray and bid up Certicom's net worth.