BlackBerry just announced that it has signed a letter of intent to hand over the company to Fairfax Financial Holdings for USD 4.7 billion which will take it private. BlackBerry has six weeks to consider the deal after which it is expected to be completed barring any alternative financial arrangements that the company may agreed upon. Fairfax Financial expects BlackBerry to stay the course and execute its most recently announced plan to refocus towards the enterprise market.
What this means is that if the sale proceeds as expected, the company will go private and all shareholders will receive $9 per share. Fairfax Financial is BlackBerry’s largest shareholder, owning 10% of the company, and its CEO, Prem Watsa, was on BlackBerry’s board of directors until recently when he resigned to remove any conflicts of interest following the announcement in August that Fairfax was planning to buy out the company.
The agreement doesn’t mean BlackBerry has been sold. What was signed was a letter of intent to take the company private by a consortium under the leadership of Fairfax Financial. Fairfax’s partners have yet to come forward to reveal themselves and will not do so until the end of the due diligence period according to The Globe and Mail. According to Prem Watsa, there are no technology companies involved in the deal and that the majority of the funds will be from Canada.
There will be a due diligence period which will end in early November of this year in which BlackBerry is allowed to explore other alternative arrangements which Fairfax may match. If BlackBerry signs a new arrangement with a different beneficiary during that time, the company will have to pay Fairfax USD 0.30 per share.
It was revealed back in August that BlackBerry’s current CEO, Thorsten Heins, has an incentive to the tune of USD 55.6 million if he manages to not only sell the company but gets himself removed from his position. Neither Fairfax Financial nor BlackBerry has said anything about Heins’ future at this point.
Fairfax still plans to execute the direction that was announced by BlackBerry last week, which was for the company to serve primarily the enterprise market. Whether this means that BlackBerry will leave the consumer market entirely has yet to be confirmed although it did say that it is canceling the low end devices to focus on devices aimed at the enterprise and professional consumer markets. BlackBerry is set to hold Jam Asia, its developer centric event later this week in Hong Kong. At this point, plans for the event have yet to change, and so far it’s business as usual.
To put the deal in perspective, BlackBerry currently holds USD 2.8 billion in cash, which means that the value of the company itself is merely USD 1.8 billion. That is a far cry from the glory days when BlackBerry was valued at USD 82 billion in 2008. The value of the deal is less than Nokia’s mobile business which was set to sell to Microsoft by the end of Q1 2014 for USD 5 billion, or USD 7 billion if you include the patent portfolio which is worth more than $2 billion. Coincidentally, this past weekend Apple sold a record 9 million units of its new iPhone 5s and 5c, which earned the company around USD 5 billion.
We will have more as the story unfolds.
