BlackBerry Ltd. (BB,BB.TO), a provider of intelligent security software and services, announced Tuesday that it has entered into an agreement to sell substantially all of its non-core patents and patent applications to Malikie Innovations Ltd. for a combination of cash at closing and potential future royalties in the aggregate amount of up to $900 million.
Malikie is a newly-formed subsidiary of Key Patent Innovations Ltd., a leading intellectual property monetization company.
The transaction is not subject to any financing conditions. Funding has been secured from a leading US-based investment firm, with in excess of $30 billion of assets under management.
Under the terms of the agreement, BlackBerry will receive $170 million in cash on closing and an additional $30 million 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.
The royalty payments to BlackBerry will initially be capped at $700 million, subject to an annual cap increase of an amount equal to 4% 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.
Approximately 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 completion of the transaction is conditional upon, among other things, satisfaction of all regulatory conditions under the Hart-Scott-Rodino Antitrust Improvements Act in the U.S. and the Investment Canada Act.
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