BlackBerry strikes $4.7B deal to go private via Fairfax bid

BlackBerry (NASDAQ:BBRY) said it has reached an initial deal with a consortium of investors led by Fairfax Financial Holdings to take the smartphone pioneer private in an agreement that values the company at $4.7 billion.

The deal, which some had speculated would come to pass because Fairfax is one of BlackBerry's largest investors, removes a great deal of uncertainty about BlackBerry's future. A special committee of the company's board has been exploring since mid-August whether to sell the firm.

Under the "letter of intent" the company signed, BlackBerry shareholders would receive $9 in cash for each share of BlackBerry they hold. According to Bloomberg that would only be a 3.1 percent premium over BlackBerry's closing price last week. The consortium, whose other members have not been named, would acquire for cash all of the outstanding shares of BlackBerry not held by Fairfax. Fairfax intends to contribute the shares of BlackBerry it currently holds into the transaction.

Prem Watsa, chairman and CEO of Fairfax, which holds a 9.9 percent stake in BlackBerry, resigned in August from BlackBerry's board due to "potential conflicts that may arise" during the company's strategic review process. Reports have also recently suggested that former BlackBerry co-CEO Mike Lazaridis was considering mounting a bid to take the company private in conjunction with several private equity firms, including the Blackstone Group and the Carlyle Group. It's unclear if Lazaridis is involved in Fairfax's deal to take BlackBerry private.

Lazaridis declined to comment through a spokesman, according to a New York Times report. Neither Fairfax nor Watsa responded to requests for comment, the report said. The consortium said it is "seeking" financing from Bank of America Merrill Lynch and BMO Capital Markets. BlackBerry is mainly debt-free and had about $2.6 billion in cash at the end of the last quarter.

However, as the Times notes, the deal is not finalized by any measure. A finalization of the deal will be subject to a number of conditions, including that Fairfax is satisfied with its due diligence. Fairfax also will need to gain financing to acquire BlackBerry.

Recent reports also indicated Fairfax has been holding discussions with several private equity and industry players that might be interested in a buyout. Watsa has said Fairfax aims to hold onto its stake in BlackBerry, and has said he feels that the market is undervaluing the company.

Due diligence is expected to be completed by Nov. 4, and the parties said they aim to have a definitive agreement by then. In the meantime, BlackBerry can "go shop" and is permitted to actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals.

The announcements comes after BlackBerry announced on Friday that it will cut 4,500 jobs--around 40 percent of its workforce--and will post a nearly $1 billion loss for its most recent quarter, mainly due to unsold BlackBerry 10 smartphone inventory. The company indicated on Friday it was shifting its focus away from the consumer smartphone market.

"We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees," Watsa said in a statement. "We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world."

Watsa, who, as the Wall Street Journal notes, is often called Canada's Warren Buffett, has long said he thinks BlackBerry is undervalued and that he is confident in the company's long-term prospects.

"At this stage further bids on BlackBerry's assets cannot be ruled out, but this certainly marks a new chapter in the destiny of the company whether this bid is accepted or a rival offer materializes," CCS Insight analyst Ben Wood said.

"Irrespective of this bid, questions around BlackBerry's future remain unchanged," Wood said. "It seems unlikely it can continue as it is and while the most attractive option is to focus on business users, tough decisions will need to be made about which parts of the business to persevere with and which pieces to spin off or abandon."

Carmi Levy, a technology analyst from Ontario, told the BBC that "Fairfax Financial... is one private investment company that is not interested in breaking the company up for parts."

For more:
- see this release
- see this Bloomberg article
- see this Globe and Mail article
- see this NYT article
- see this separate NYT article
- see this WSJ article (sub. req.)
- see this AllThingsD article
- see this BBC News article

Related Articles:
Can BlackBerry survive as a services company? I doubt it.
Report: Former BlackBerry CEO Lazaridis could try to take company private
BlackBerry to cut 4,500 jobs, expects bleak quarterly results
Report: BlackBerry sale interest tepid, suitors want to carve up company
Report: BlackBerry hopes to wrap up sales process by November
BlackBerry director envisions future as a 'niche company'

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