YOU ARE HERE: LAT HomeCollections

BlackBerry in deal to go private

A group led by Fairfax Financial Holdings Limited reaches a tentative agreement to pay $4.7 billion for the troubled smartphone maker.

September 23, 2013|By Andrea Chang
  • BlackBerry said it had signed a letter of intent with a consortium led by Fairfax Financial Holdings Limited, which plans to take the smartphone maker private. Above, BlackBerry Chief Executive Thorsten Heins during a January launch event for the Blackberry 10 smartphones.
BlackBerry said it had signed a letter of intent with a consortium led by… (Mario Tama, Getty Images )

In a last-ditch effort to salvage its business, BlackBerry has struck a tentative deal to be bought by a Canadian insurance company for $4.7 billion.

An agreement is not complete and other bids could emerge, but already analysts are saying that the smartphone maker's lifeline may not be enough.

"Nothing has changed about the direction of the company. The only thing in question is how long the company can be sustained by the new owners," said Roger Entner, founder of Recon Analytics. "The company is going through massive losses, and it is unclear how long the private equity firm can keep the company afloat with no sales and a new product that flopped."

BlackBerry continues to face a host of problems. Its new smartphones running the revamped BlackBerry 10 operating system aren't selling well. On Friday, the company said it planned to lay off about 4,500 employees, or about 40% of its workforce. It also said it lost nearly $1 billion in its most recent quarter.

On Monday, BlackBerry said it had signed a letter of intent with a consortium led by Fairfax Financial Holdings Limited, which plans to take the smartphone maker private.

Fairfax, a financial services holding company based in Toronto, hinted that it would steer BlackBerry toward focusing on business customers, where it has historically done well.

"We believe this transaction will open an exciting new private chapter for BlackBerry," Prem Watsa, chairman and chief executive of Fairfax, 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."

Under the terms of the tentative agreement, BlackBerry shareholders would receive $9 in cash for each share they hold. Fairfax owns about 10% of BlackBerry's common shares and plans to contribute those shares into the transaction, BlackBerry said.

Shares of BlackBerry rose 9 cents, or 1.1%, to $8.82 on Monday.

BlackBerry's board of directors has approved the terms subject to "a number of conditions," including due diligence, negotiation and execution of a definitive agreement, and regulatory approvals.

Diligence is expected to be completed by Nov. 4, and the companies' intention is to negotiate and execute a definitive transaction agreement by then.

In the interim, BlackBerry is "permitted to actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals," the company said, meaning it might seek a higher bid from a different potential buyer.

"The special committee is seeking the best available outcome for the company's constituents, including for shareholders," said Barbara Stymiest, chairwoman of BlackBerry's board of directors. "Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium."

Tech analysts have long said the Canadian device maker's days as a public stand-alone company were numbered.

Last month, BlackBerry announced that it had formed a special committee to weigh strategic alternatives, including putting itself up for sale.

The five-member special committee, which includes Chief Executive Thorsten Heins, said in a statement that options included "possible joint ventures, strategic partnerships or alliances, a sale of the company or other possible transactions."

Twitter: @byandreachang

Los Angeles Times Articles