Troubled Canadian smartphone maker BlackBerry Limited (“BlackBerry”) announced that it has signed a letter of intent (LOI), by which a consortium led by Fairfax Financial Holdings Limited (“Fairfax”) has offered to acquire the company, subject to due diligence. The deal is said to be valued at approximately US$4.7 billion, equivalent to US$9 in cash for every BlackBerry share sold.
The consortium would acquire for cash all outstanding shares of BlackBerry not held by Fairfax. Fairfax currently owns approximately 10 percent of BlackBerry’s common shares. If for any reason BlackBerry backs out of the deal, the company shall pay Fairfax a fews of US$0.30 per BlackBerry share.
Due diligence is expected to be completed by November 4, 2013.
Barbara Stymiest, Chair of BlackBerry’s Board of Directors, 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.”
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.”
The once-mobile giant has struggled in recent years, seeing its worldwide marketshare plummet from a high of 20.7% in 2009 to its paltry single digit 2.9% today (IDC: Q3 2013). Certainly a far cry from being Canada’s most valuable company with a market capital of US$67.35 billion in 2007. The much-delayed next generation BlackBerry operating system, BlackBerry 10 OS eventually shipped with new hardware – the BlackBerry Z10.
The Z10 received encouraging reviews but did not gain as much traction among consumers as the company would have liked. BlackBerry subsequently launched the Q10, Q5 and recently Z30 smartphones but this has done little to improve its fading fortunes. Android continues to surge ahead in popularity with Apple iOS in distant second, and Windows Phone 8 also occupying the bottom rung.
A few days ago, BlackBerry announced it has US$1 billion worth of unsold BlackBerry Z10 smartphone inventory and would be laying off 4,500 jobs. It also revealed that it would exit the consumer market. And as if things couldn’t get any worse, the mobile maker had a troubled launch of its much-awaited BlackBerry Messenger app for Android and iOS over the weekend.
BlackBerry currently has $2.8 billion in cash and equivalents at the end of the recent most quarter.
Is this the beginning of the end for BlackBerry?