Fairfax Bids $4.7 Billion for BlackBerry, Aims to Take Company Private

by Istvan Fekete on September 24, 2013

Canada’s iconic company, the struggling BlackBerry, has taken a $4.7 billion offer from Fairfax Financial holdings, or $9 per share. The offer could potentially rescue the company, the Globe and Mail reports.

“BlackBerry Limited today announced it has signed a letter of intent agreement (“LOI”) under which a consortium to be led by Fairfax Financial Holdings Limited (“Fairfax”) has offered to acquire the company subject to due diligence.”

“The letter of intent contemplates a transaction in which BlackBerry shareholders would receive U.S. $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 percent of BlackBerry’s common shares, intends to contribute the shares of BlackBerry it currently holds into the transaction.”

BlackBerry has been losing field for a while now. Unfortunately for the Canadian company, its latest mobile OS, BB10, and this year’s handsets have failed to impress either the press or users, which has resulted in grim financial results. According to a report issued by the company recently, BlackBerry has lost nearly $1 billion in the second quarter due to a large inventory of unsold phones, and will cut 4,500 jobs. As of March, the company has 12,500 employees.

By accepting Fairfax’s offer, BlackBerry has also accepted to go private.

But there is still a large amount of uncertainty about the Fairfax bid, which already owns nearly 10% of the company. Fairfax has been given up to six weeks to go through BlackBerry’s confidential information and confirm its $4.7 billion offer.

Secondly, since Fairfax did not disclose its partners, the future of BlackBerry remains uncertain, since we are talking about a company with financial expertise. If Fairfax and its partners fail to attract a strategic player, such as another technology company, BlackBerry soon will be history.

The thoughts of Canadian pension funds are similar, as Fairfax has spoken with numerous private equity players and pension funds about taking them on as partners.

But if the Fairfax bid goes through, aching questions remain: How will the new owner guide the once star BlackBerry to success? Currently, BlackBerry has fundamental problems: sales are falling, and in terms of hardware, the company’s future is pretty grim.

And its future doesn’t look bright when considering its other businesses: BBM is currently limited to its installed based (60 million users worldwide), and the company couldn’t secure a great place in the mobile device management section.

In other words, we will keep our fingers crossed for you, BlackBerry.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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