Prem Watsa's Fairfax Financial consortium signs US$4.7-billion deal to buy BlackBerry

$9 share offfer

TORONTO – BlackBerry Ltd. (TSX:BB) has signed a deal to be bought by a consortium led by its largest shareholder in a deal valued at U$4.7 billion, the companies announced Monday.

The consortium led by Fairfax Financial Holdings. Ltd. (TSX:FFH), a Canadian investment firm primarily focused on the insurance industry, has offered US$9 per share in cash for the smartphone maker.

The price was above BlackBerry’s recent value on public markets, following the company’s announcement Friday that it will cut about 40 per cent of its global workforce, about 4,500 jobs, and record a writedown of nearly $1 billion.

Under the deal announced Monday, the consortium will acquire all of the outstanding shares of BlackBerry not held by Toronto-based Fairfax, which owns approximately a 10 per cent of the Waterloo, Ont.-based company.

“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees,” Fairfax chairman and chief executive Prem 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 with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world.”

The BlackBerry board of directors has approved the terms of the letter of agreement.

BlackBerry shares were down 60 cents at C$8.48 on the Toronto Stock Exchange before a trading halt. After trading resumed at 2 p.m. ET, the shares jumped to C$9.25 in Toronto and US$9.03 on the Nasdaq market in the United States.

The consortium is expected to complete its due diligence by Nov. 4. Until then, BlackBerry is allowed to actively solicit and evaluate rival offers.

The agreement includes a break fee of at least 30 cents per share, or about $157 million, if BackBerry signs a deal with another buyer under certain circumstances. That amount increases to 50 cents per share or about $262 million if BlackBerry has signed a definitive agreement with the Fairfax consortium.

The New York Times reported on the weekend, citing sources, that BlackBerry co-founder Mike Lazaridis, who stepped down as co-chief executive in 2011, has approached two U.S. private equity firms about making a possible bid.

“The special committee is seeking the best available outcome for the company’s constituents, including for shareholders,” BlackBerry chairwoman Barbara Stymiest said.

“Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium.”

BlackBerry shares have been traded at less than half the value they had in January ahead of the launch of its first smartphones running its new BlackBerry 10 operating system.

However, the launch of BB10 fizzled and the new devices, failed to spark consumer interest.

On Friday, the company said it plans a writedown of up to $960 million in the second quarter, primarily from poor sales of its BlackBerry Z10 touchscreen smartphones.

It will also book a $72-million restructuring charge related to changes in its operations, which include previous layoffs.

BlackBerry says it expects to post a loss of US$950 million to $995 million for the fiscal second-quarter. It also projected US$1.6 billion in sales, far short of analyst expectations of about US$3 billion.