RIM determined to press ahead with hostile Certicom takeover

The New Year appears to shaping into a stormy one for Research in Motion (RIM) and it’s not because of the galloping sales of its latest smart phone.

The Waterloo, Ont-based maker of the BlackBerry smart phones, yesterday announced it would fight off every effort of data encryption specialist Certicom Corp. to block RIM’s $66 million hostile takeover bid.

RIM said it has learned Certicom intends to apply to the Ontario Supreme Court of Justice and the Ontario Securities Commission for an injunction and a cease trade order that would prevent RIM from acquiring Certicom shares.

Certicom is best known for its Elliptic Curve Cryptography (ECC) technology, which is used by Motorola, IBM and other customers to protect information. Acquisition of the company could conceivably boost the business-grade security of BlackBerry handsets.

On Dec. 10 RIM offered to by Certicom stock for $1.50 per share. Last Thursday, Certicom called RIM’s takeover bid “highly opportunistic”. The security company’s special committee of independent directors urged shareholders not to take any action regarding the offer.

Certicom alleged RIM used confidential information – contrary to the terms of agreements entered between RIM and Certicom.

Certicom also said RIM failed to make proper disclosure in its offer to purchase sent to Certicom shareholders.

“This conduct is consistent with Certicom’s past [behaviour] in rebuffing RIM’s overtures to conclude a negotiated transaction,” a press statement released by RIM on Monday said. It expressed disappointment that “Certicom directors are again attempting to keep the decision as to whether to accept RIM’s offer out of Certicom shareholder’s hands.”

RIM co-CEO Jim Balsillie said his company had been talking to Certicom’s management about a potential transaction since February, 2007. He said despite nearly two years of discussion, RIM has been “unable to engage the Certicom management in a meaningful dialogue to advance the terms of a potential transaction.”

Certicom responded by setting up a special committee and saying that its board of directors would “evaluate and consider the adequacy of RIM’s proposal, solicit other proposals, consider the full range of alternatives to maximize shareholder value and make the recommendations to the full Board of Certicom.”

Certicom would be a highly valuable piece of intellectual property for RIM, according to Ronald Guia, principal analyst with market research firm Frost & Sullivan in Toronto. “Certicom has integration with a whole bunch of different handset vendors. I think this will ultimately strengthen the BlackBerry portfolio,” he said.

A tie-up with Certicom would also help RIM meet more vigorous security requirements, especially in the government sector, says Ryan Reith, a research analyst with Framingham, Mass.-based IDC.

For example, he said, U.S. government agencies require technology vendors to address five different levels of encryption and so far RIM has accomplished three.

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