BlackBerry to sell non-core patents, applications to Malikie for $900M

BlackBerry announced that it has entered into an agreement to sell substantially all of its , a newly-formed subsidiary of Key Patent Innovations Limited, or KPI, an intellectual property monetization company, for a combination of cash at closing and potential future royalties in the aggregate amount of up to $900M. The transaction is not subject to any financing conditions. Funding has been secured from a US-based investment firm, with in excess of $30B of assets under management. 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, on the following basis: 8% of the first $500M of profits; 15% of the next $250M of profits; 30% of the next $250M of profits; and 50% of all subsequent profits. 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. 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. It also excludes approximately 120 monetizable non-core patent families relating to mobile devices, as well as all existing revenue generating agreements. 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. 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 United States and the Investment Canada Act.