BlackBerry strikes deal with Fairfax
TORONTO—One of BlackBerry’s largest shareholders has made a multi-billion-dollar offer for the troubled smartphone maker hinged on several conditions that make the outcome anything but certain.
A letter of intent to acquire the Waterloo, Ont.-based company in a deal that values the company at $4.7 billion (U.S.) is being led by Canadian investment firm Fairfax Financial and includes a consortium of others who have not been identified.
“They’re just trying to buy themselves some more time here,” said MKM Partners analyst Mike Genovese.
“This does not read like an actual deal; this is an announcement to stem the bleeding and buy some time.”
It’s “crazy that they would do a letter of intent before doing due diligence,” added Genovese.
At first glance, the move by Fairfax, which owns about 10 percent of BlackBerry common shares, may seem like a vote of confidence in the company’s future.
But the letter of intent—filed with the U.S. Securities and Exchange Commission—outlines various ways that Fairfax could exit the deal with a hefty payout, or step away if it deems the transaction unattractive.
Fairfax could back out if it’s not satisfied with its due diligence on BlackBerry’s finances or if it doesn’t receive the financial backing it needs, according to the public release.
And under the agreement, Fairfax would benefit from break fees associated with other bidders who might emerge in the coming months with a better deal, or from a transaction that materializes within six months after the due diligence wraps up in early November.
“We have devoted substantial time, resources, and energy to studying the company,” Fairfax president Paul Rivett wrote in a letter to BlackBerry’s special committee formed to look at its strategic options.
“We believe our offer provides an extremely compelling combination of attractive and certain value for shareholders.”
In the meantime, what the announcement has done is slow the dramatic decline in BlackBerry’s stock price, which tumbled 16 percent on Friday when the company announced it anticipated a near billion-dollar loss for the second quarter on poor sales of its handsets.
The share decline continued yesterday until the BlackBerry-Fairfax pact was announced, which helped the company’s stock end flat on the Toronto Stock Exchange at $9.08.
Analyst Troy Crandall of Montreal investment firm MacDougall, MacDougall and MacTier said the tentative deal is positive for shareholders because “it relieves the uncertainty and volatility.”
“[But] it’s far from a done deal,” the analyst added.
BlackBerry has been struggling to maintain a hold on both its business users and average consumers. Both have turned increasingly to competitors like Apple’s iPhone, which posted record sales of its latest devices over the weekend.
The iPhone also has become an increasingly popular phone for business users.
“If there’s one thing we’ve learned from the last five years and the smartphone wars, is that bring your own device to work is a very powerful force,” Crandall said.
“If you get the hearts and minds of consumers, it follows through to enterprise,” he reasoned.