By Michael Elkins
BlackBerry (TSX:BB) announced Tuesday that the Canadian software company has entered into an agreement to sell substantially all of its non-core patents and patent applications to Malikie Innovations for a combination of cash at closing and potential future royalties in the aggregate amount of up to $900 million.
Under the terms of the agreement, BlackBerry will receive $170M in cash on closing and an additional $30M in cash by no later than the third anniversary of closing. BlackBerry will also be entitled to receive annual cash royalties from the profits generated from the BlackBerry patents.
Royalty payments to BlackBerry will initially be capped at $700M, subject to an annual cap increase of an amount equal to 4% of the remaining portion of the $700M 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.
"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 & CEO, 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."
"We are very excited to have completed this transaction with a partner of BlackBerry's calibre, and we look forward to getting to work to maximize returns from this portfolio," said Angela Quinlan, Managing Director, KPI.
Approximately 32,000 patents and applications relating primarily to mobile devices, messaging, and wireless networking will be sold in the transaction. The deal excludes patents and applications that are necessary to support BlackBerry's current core business operations. It also excludes approximately 120 monetizable non-core patent families relating to mobile devices, as well as all existing revenue-generating agreements.
Shares of BB are up 3.88% in pre-market trading on Tuesday.