BlackBerry, once the biggest name in mobile and worth more than $200
billion at its peak period in 2007, may soon be sold for less than $5
billion, according to a statement issued by the former smartphone giant.
BlackBerry on Monday said it has signed a Letter of Intent to sell
the company to a group of investors led by a Canadian insurance company,
Fairfax Financial Holdings Limited for $9 per share, in a deal that
would total $4.7 billion. Fairfax currently owns about 10 percent of
BlackBerry’s shares.
Trading of BlackBerry’s stock was halted last week when the company
announced that it had more than $1 billion in unsold inventory, planned
to layoff half of its workforce, and would soon exit the consumer
smartphone business, and when trading resumed, the stock rose over 2
percent to $8.95. Prior to the announcement shares in the troubled
smartphone maker company were down more than 5 percent for the day.
Fairfax Financial, sometimes called the Berkshire Hathaway of Canada,
is a holding company whose primary business is in insurance. It is led
by Prem Watsa, a chemical engineer by training who has run the firm
since the mid-1980s.
The press-shy Watsa has long been a supporter of BlackBerry, and his name has been linked with a potential buyout for months.
“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,” Watsa said in a statement.
Shares in BlackBerry had plunged since Friday, when the company
warned of a sharp drop in revenue and massive job cuts. The group has
until Nov. 4 to conduct due diligence.
“If I was a Blackberry shareholder I would jump at it,” said James
Faucette, an analyst with Pacific Crest. “They’re actually entering into
a period of relative stability. It’s going to be hard to improve things
going forward. They’re going to be hard-pressed to find a more willing
buyer.
“BlackBerry itself is worth less than he’s offering,” said Faucette.
Brian Colello of Morningstar said based on the company’s disastrous
earnings warning last 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.
“The benefit to this sort of takeover is the ability for BlackBerry
and the consortium to reinvent the company without public scrutiny. So
we won’t see any of these warnings or earnings releases that do nothing
but disappoint investors. The company can go ahead with its strategy, as
it pleases, that’s a positive.
BlackBerry, which has struggled to compete in the smartphone
business, said last Friday it will slash 4,500 jobs, or about 40 percent
of its workforce, and expects to post a nearly $1 billion
second-quarter loss.
Ironically, the announcement came the same day Apple’s new $199
flagship iPhone 5S went on sale and people were standing in line around
the country to buy it. It was trying to compete with new advanced
smartphones by Apple, Samsung and other rivals that helped put
Canada-based BlackBerry in the current financial bind.
As part of a massive restructuring, the struggling company said it
set targets to reduce its operating expenditures by approximately 50
percent by the end of the first quarter in fiscal 2015.
Fairfax’s acquisition of BlackBerry is contingent on a due diligence
period in which Fairfax will audit the BlackBerry business and finalize a
deal. BlackBerry says that it expects to negotiate a deal by November
4, 2013. BlackBerry is allowed to solicit deals from other groups during
that period and would pay a penalty of 50 cents per share if it breaks
away from the sale.
hmmmmmmmm
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