Prem Watsa’s Fairfax Offers $4.7 Billion To Take BlackBerry Private


BlackBerry (NASDAQ:BBRY) (TSE:BB) announced that a consortium of buyers led by Fairfax Financial Holdings (TSE:FFH) (OTCMKTS:FRFHF), the firm controlled by Prem Watsa and its largest shareholder offered to acquire the company and take it private for $4.7 billion or $9 per share.

Prior to the announcement of the struggling Canadian smartphone manufacturer today, the stock price of BlackBerry plummeted by 5% to $8.23, but climbed to $8.82 per share by the end of the day. The trading for the stock was halted briefly before the announcement of the proposal.

According to BlackBerry, the consortium of buyers offered to acquire all the outstanding shares of the company not yet owned by Watsa’s firm in an all cash transaction. Fairfax Financial Holdings owns 10 percent stockholdings in the company, and plans to contribute its position in the transaction.

The board of directors of BlackBerry approved the terms of the letter of intent (LOI) submitted by the consortium of buyers based on the recommendations of its special committee, which is responsible in exploring alternative strategies to save the company.

Fairfax Financial Holdings’ group of buyers is seeking financing form Bank of America Merrill Lynch and BMO Capital Markets to take BlackBerry private under certain conditions such as due diligence, negotiation and execution of a definitive agreement, and customary regulatory approvals

BlackBerry anticipated the completion of diligence, negotiation and execution of a definite transaction agreement by November 4, 2013. The Canadian smartphone manufacturer is free to actively solicit, receive, evaluate, and enter into potential discussion with parties that would submit other offers during the diligence period.

Under the LOI signed by the company, BlackBerry’s negotiation with Fairfax Financial Holding’s consortium is terminated in good faith once it enters a definitive agreement with other entities offering an alternative transaction publicly announced and consummated by the end of the diligence period

In a statement, BlackBerry’s chairperson Barbara Stymiest 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.”

On the other hand, Watsa said the consortium’s proposal will open an exciting private chapter for BlackBerry, carriers, customers, and employees. He added, “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.”

BlackBerry’s enterprise business is its crown jewel because it’s networks are the most secure worldwide and the United States National Security Agency (NSA) failed to circumvent its security measures. Peter Misek, managing director of global investment banking firm, Jefferies confirmed that BlackBerry’s networks are “NSA proof” based on his conversations with the agency.

Last week, analysts and investors were surprised when BlackBerry announced its preliminary financial results indicating to write off almost $1 billion worth of unsold BlackBerry 10 devices, and to cut jobs by 4,500 globally. The shares of the company plunged 17%.