BlackBerry agrees to $4.7bn privatisation

November 2013 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

BlackBerry Limited announced in late September that it had agreed to be acquired by a consortium of Canadian investment companies led by Fairfax Financial Holdings Ltd, in an all cash deal valued at $4.7bn.

The company noted that a letter of intent had been signed which stated that BlackBerry’s shareholders would receive $9 in cash for each share of the company they hold. According to the terms of the deal, the consortium would acquire all outstanding shares of BlackBerry not held by Fairfax, which holds a 10 percent share in the company.

In a statement announcing the deal, Prem Watsa, chairman and chief executive officer 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.”

In its statement the BlackBerry board said it had approved the terms under which the consortium would take the company private, subject to a number of conditions. The deal is conditional on the successful completion of due diligence, the negotiation of a definitive agreement between both sides and customary regulatory approvals. The terms of the deal also offer BlackBerry a ‘go shop’ period of six weeks in which the company can entertain better offers.

According to BlackBerry Chair Barbara Stymiest, the five-person special committee, set up by the company’s board to seek alternative corporate strategies, 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,” she said.

BlackBerry, which until recently was known as Research In Motion (RIM), had previously been one of Canada’s most valuable companies. Indeed, in June 2008 BlackBerry had a market value of $83bn. However, in recent years the company’s stock has plummeted from over $140 per share to less than $9. BlackBerry’s fall from grace coincided with a period of increased competition from rivals Apple Inc and Samsung Electronics. At BlackBerry’s peak in late 2009 the company enjoyed a global market share over 20 percent; currently Blackberry has around 1.5 percent.

Last year, BlackBerry announced that it was shedding 5000 employees from its workforce as it looked to regain a firm financial footing and some of its old market share − evidently these moves were unsuccessful. BlackBerry has subsequently declared that it is abandoning the consumer market, a move which will see the company lay off another 4500 employees, or 40 percent of its global workforce. BlackBerry has not yet clarified from where the redundancies will come. The job losses and retreat from the consumer sector come as the company looks to reduce its costs by around 50 percent and shift its focus back to business customers. BlackBerry intends to decrease its mobile device offering to just two high-end devices and two entry-level handsets.

The company also announced a net loss of $965m in the second quarter of 2013 following disappointing sales of its new Z10 smartphone. Sales of the phone were so poor that the company had to write off $934m. Shares in BlackBerry fell 5 percent following the sale − they had fallen by 17 percent when the company pre-announced its quarterly results the week before. BlackBerry’s shares were suspended at $8.26 ahead of the announcement of the deal with the Fairfax-led group. The company’s share price has fallen by 30 percent during 2013.

Richard Summerfield