BlackBerry - sold to Fairfax!

DQI Bureau
New Update

Beleaguered Canadian smartphone maker BlackBerry is going private in a $ 4.7 bn deal. A group led BY Prem Watsa, Chairman and CEO of Fairfax Financial Holdings Ltd and BlackBerry's biggest shareholder ( holds 10% share) has agreed to buy the company. According to a statement by the company it said, " We have signed a letter of intent agreement (LOI) under which a consortium to be led by Fairfax Financial Holdings Limited has offered to acquire the company subject to due diligence."


The letter of intent contemplates a transaction in which BlackBerry shareholders would receive USD $9 in cash for each share of BlackBerry share they hold, in a transaction valued at approximately U.S. $4.7 billion. The consortium would acquire for cash all of the outstanding shares of BlackBerry not held by Fairfax. Fairfax, which owns approximately 10% of BlackBerry's common shares, intends to contribute the shares of BlackBerry it currently holds into the transaction.

It may be recalled that last month the company's board of directors has formed a ‘special ommittee' to explore strategic alternatives to enhance value and increase scale in order to accelerate BlackBerry 10 deployment. These alternatives could include, among others, possible joint ventures, strategic partnerships or alliances, a sale of the company. With that announcement of the special committee, Prem Watsa, Chairman and CEO of Fairfax Financial left BB due to potential conflicts that may arise during the process. During that time Watsa said, "I continue to be a strong supporter of the company, the board and management as they move forward during this process, and Fairfax Financial has no current intention of selling its shares."

But though it was speculated that Fairfax might bid, but analysts were skeptical whether Watsa can pool in other investors. But Watsa, hailed as Canadian Warren Buffet has somehow pulled this coup of sorts.


Coming to the deal, the diligence is expected to be completed by November 4, 2013 The parties' intention is to negotiate and execute a definitive transaction agreement by such date. During such period, BlackBerry is permitted to actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals as part of the deals' go shop' period.

Finally it's done...

It's been a traumatic Q 3 for the ailing BB that has gone into intense public scrutiny and trail by media- as one after the other the company's strategies failed. Last week the company shed 40% of its workforce and also launched a bigger smartphone- z30. But BB10 is yet to see any major success against Apple or Google OS devices. Now what will the consortium do- can Prem Watsa undo the company's challenging outlook?


That's the big question. Analyst Brian Colello at Morningstar, told BBC that BlackBerry going private would allow the company to reorganize without being under the glare of Wall Street investors. Based on the company's disastrous earnings warning on Friday, I think a deal had to happen and the sooner the better. This is probably the only out for investors and the most likely outcome."

BlackBerry-formerly called RIM- Research in Motion- saw its fortunes going south since 2010 as Android and iOS bipolarity threatened others like Nokia, Microsoft and BB. The last one has year has been so rough for BlackBerry, and with this deal- the company gets a life line. 

Can Prem Watsa rewrite the company's fate? Have your say!