September 23, 2013

Fairfax reaches tentative deal to buy BlackBerry

The Associated Press

TORONTO — BlackBerry's largest shareholder has reached a tentative agreement to pay $4.7 billion for the troubled smartphone maker, even as many investors fret about its potential demise.

click image to enlarge

In this Wednesday, Jan. 30, 2013, file photo, a man uses his Blackberry as people wait for the Blackberry BB10 launch in Toronto. Fairfax Financial Holdings has offered to buy BlackBerry in a deal that values the Canadian smartphone company at about US$4.7 billion, on Monday, Sept. 23, 2013. (AP Photo/The Canadian Press, Nathan Denette, File)

BlackBerry Ltd. said Monday that Fairfax Financial Holdings Ltd. has signed a letter of intent that "contemplates" buying the company for $9 per share in cash in a deal that would take the company private. The tentative deal comes just days after the Canadian company announced plans to lay off 40 percent of its global workforce. The offer price is below what BlackBerry was trading at before the layoff announcement.

Analysts say that although BlackBerry's hardware business is not worth anything, the company still owns valuable patents. Patents on wireless technologies have exploded in value in recent years, as makers of the iPhone and various Android devices sue each other. Having a strong portfolio of patents allows phone makers to defend themselves and work out deals.

BlackBerry is also strong in having total cash and investments of about $2.6 billion, with no debt, though it's burning through that stockpile. In just the past few months, it's spent about half a billion dollars.

The possible BlackBerry deal follows a $7.2 billion offer that Microsoft Corp. made this month for the phones and services business of another troubled phone maker, Nokia Corp. Last year, Google Inc. paid $12.4 billion for another fallen pioneer, Motorola Mobility, mostly for its patents.

The BlackBerry, pioneered in 1999, was once the dominant smartphone for on-the-go business people and other consumers. It could be so addictive that it was nicknamed "the CrackBerry." President Barack Obama couldn't bear to part with his BlackBerry. Oprah Winfrey declared it one of her "favorite things." But then came a new generation of competing smartphones, starting with Apple's iPhone in 2007. The BlackBerry, that game-changing breakthrough in personal connectedness, suddenly looked ancient.

Although BlackBerry was once Canada's most valuable company with a market value of $83 billion in June 2008, the stock has plummeted to less than $9 from over $140 a share, giving it a market value of $4.6 billion, just short of Fairfax's offer.

BlackBerry shares plunged 17 percent Friday after the company announced a quarterly loss of nearly $1 billion and layoffs of 4,500 workers. It gained 9 cents, or 1.1 percent, to $8.82 Monday.

Fairfax head Prem Watsa, who owns 10 percent of BlackBerry, stepped down as a board member last month because of potential conflicts when BlackBerry announced it was considering a sale. If the proposed deal goes through, BlackBerry will no longer be traded publicly.

"We believe this transaction will open an exciting new private chapter for BlackBerry its customers, carriers and employees," Watsa said in a statement. "We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company."

Watsa is one of Canada's best-known investors and is the billionaire founder of Toronto-based Fairfax Financial Holdings Ltd. BlackBerry founder Mike Lazaridis recruited Watsa to join the company's board when Lazaridis and Jim Balsillie stepped aside as its co-CEOs in January 2012. Because Watsa was on the board, he likely has the best information on the value of its patents and other assets, said Mike Walkley, an analyst with Canaccord Genuity.

Watsa is likely to keep current CEO Thorsten Heins in the job should the deal happen. He said in April that he's a big supporter of Heins and has called his promotion the right decision. If BlackBerry is sold and Heins is ousted, though, the embattled CEO stands to receive $55.6 million in stock awards, benefits and other compensation, according to the company's proxy statement filed in May.

(Continued on page 2)

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors




Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)