BlackBerry Courting $4.7 Billion Buyout Led By Fairfax Financial
Just one business day after BlackBerry Limited released its preliminary second quarter fiscal 2014 results, the company said that it has agreed to court a $4.7 billion buyout deal offered by a consortium led by billionaire Prem Wasta's Fairfax Financial Holdings Limited. Toronto-based Fairfax already owns approximately 10 percent of BlackBerry's common shares, and will contribute these shares into the transaction. The consortium will purchase all remaining outstanding non-Fairfax owned shares for $9 in cash a piece.
Essentially this means that, if the deal is approved, BlackBerry will be going private, following in the footsteps of troubled PC maker Dell. This will allow the company to reorganize outside of the public eye, and without a majority shareholder vote. However nothing has actually been signed at this point; BlackBerry has merely announced its letter of intent agreement. Negotiation and execution of a definitive agreement still needs to be hammered out by November 4, as well as customary regulatory approvals.
"We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees," Wasta said. "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."
The buying group is currently seeking financing from BofA Merrill Lynch and BMO Capital Markets. Meanwhile, BlackBerry has until November 4 to shop around for alternative bids, subject to a termination fee between $0.30 and $0.50 cents per BlackBerry share. Barbara Stymiest, Chair of BlackBerry's Board of Directors, commented on Monday that BlackBerry is seeking the best available outcome for the company and its shareholders.
In June 2008, BlackBerry Limited, formerly known as Research in Motion (RIM), peaked at $81.62 billion, just months before the economy tanked and several quarters after Apple changed the world with the iPhone. In April 2011, BlackBerry was valued at more than $50 per share; after stock trading resumed last Friday, the company was valued at just $9.20 per share.
BlackBerry revealed a near $1 billion USD loss on Friday, partially due to a huge $930 million to $960 million write-off due to unsold Z10 smartphones, and a restructuring charge of around $72 million. The company also revealed that it had dipped into its cash reserves, eating up $500 million of its $2.6 billion in investments and cash equivalents.
Mark Sue, an analyst at RBC Capital Markets, warned on Monday that BlackBerry could run out of cash in the next 12 to 24 months. "It's a race against time for BlackBerry and preserving cash may be of utmost importance as the pace of business deterioration accelerates," Sue stated.
Watsa told FOX Business that he's committed to saving BlackBerry as a whole company rather than breaking it apart. "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," he said.
BDT & Company, LLC, BofA Merrill Lynch and BMO Capital Markets are acting as financial advisors, and Shearman & Sterling LLP and McCarthy Tetrault LLP are acting as legal advisors to Fairfax in connection with the transaction, BlackBerry said on Monday.
Kevin Parrish is a contributing editor and writer for Tom's Hardware,Tom's Games and Tom's Guide. He's also a graphic artist, CAD operator and network administrator.
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