BlackBerry has signalled its intent to be acquired by a consortium led by Fairfax Financial Holdings for $4.7bn. The news follows Blackberry's recent announcement about plans to cut 4,500 jobs, tantamount to 40% of its worldwide workforce, in an effort to stem losses.
A letter of intent contemplates a transaction in which BlackBerry shareholders would receive $9 in cash for each share of BlackBerry share they hold. The consortium would acquire for cash all of the outstanding shares of BlackBerry not held by Fairfax.
Fairfax, which owns approximately 10 per cent of BlackBerry's common shares, intends to contribute the shares of BlackBerry it currently holds into the transaction.
The BlackBerry Board of Directors, acting on the recommendation of a special committee of the board of directors, approved the terms of the letter of intent under which the consortium, which is seeking financing from BofA Merrill Lynch and BMO Capital Markets, would acquire BlackBerry and take the company private subject to a number of conditions, including due diligence, negotiation and execution of a definitive agreement and customary regulatory approvals.
Barbara Stymiest, Chair of BlackBerry's Board of Directors, said: "The Special Committee is seeking the best available outcome for the Company's constituents, including for shareholders. Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium."
Prem Watsa, Chairman and CEO of Fairfax, said: "We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. 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."
Jan Dawson, chief telecoms analyst at Ovum, commented: "Taking BlackBerry private doesn't solve the fundamental problems at the company. First, the company's device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business.
"Normally, companies are taken private in order to give a long-term strategy time to payoff without the hassles of short-term investor scrutiny. But BlackBerry's key problem for the last couple of years has been the lack of such a long-term strategy. It simply hasn't articulated a way to rebuild its business as its device sales drop precipitously.
"Unless Fairfax plans to radically change or accelerate BlackBerry's strategy, it's unlikely to be able to turn the company around. And that means we're likely seeing the beginning of the end for one of the most iconic brands in mobile technology."