Blackberry Up For Sale At $4.7bn

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.