BlackBerry to be acquired by Fairfax for $4.7bn

Late Monday, in the wake of a significant warning on financial losses and job cuts, Canadian vendor BlackBerry announced its intention to be acquired by a consortium led by  holdings company Fairfax Financial for $4.7bn.

The letter of intent contemplates a transaction in which BlackBerry shareholders would receive $9 in cash for each BlackBerry share. Fairfax, a Canadian investor that currently owns approximately ten per cent of BlackBerry’s common shares, intends to contribute them into the transaction.

The BlackBerry Board of Directors has approved the terms and the consortium, which is seeking financing from BofA Merrill Lynch and BMO Capital Markets. The deal would see the company taken private subject to a number of conditions.

Prem Watsa, Chairman and CEO of Fairfax, said: “We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. 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.”

Ben Wood, chief of research at CCS Insight, said the move would provide Blackberry with breathing space as its strategic options are assessed, while early indications suggest a retrenchment to the business market. Structural changes such as spinning off BlackBerry Messenger (BBM) and cutting back on hardware are also likely to be carefully reviewed.

“At this stage further bids on BlackBerry’s assets cannot be ruled out, but this certainly marks a new chapter in the destiny of the company whether this bid is accepted or a rival offer materializes,” Wood said.

“Irrespective of this bid, questions around BlackBerry’s future remain unchanged. It seems unlikely it can continue as it is and while the most attractive option is to focus on business users, tough decisions will need to be made about which parts of the business to persevere with and which pieces to spin off or abandon,” he added.

Jan Dawson, chief telecoms analyst at Ovum, said that taking BlackBerry private doesn’t solve the fundamental problems at the company. “First, the company’s device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business. BlackBerry’s supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It’s likely that BlackBerry will be out of the device business entirely by the middle of next year,” he said.

Yesterday Blackberry said that it expects to make a loss of between $950m and $995m during its second fiscal quarter. In addition, the firm has announced restructuring plans that will see it cut staff numbers by approximately 4,500 – equivalent to 40 per cent of its global workforce.