Consortium offers to buy BlackBerry for $4.7 billion

Consortium offers to buy BlackBerry for $4.7 billion

Summary: Fairfax Financial, a Canadian financial firm that owns 10 percent of BlackBerry shares, led a consortium with an offer to buy the company.

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BlackBerry said Monday that it will be sold to a consortium led by Fairfax Financial in a deal valued at $4.7 billion, or $9 a share.

Following a profit warning on Friday, BlackBerry was burning cash and appeared to have limited options. Wall Street analysts were urging a quick sale.

Looks like BlackBerry delivered. Analysts were looking anywhere from $7 a share to $12 a share for the company. Here's a look at how Macquarie valued BlackBerry. 

bbry092313a
Source: Macquarie

 

In a statement, BlackBerry outlined that it signed a letter of intent to sell out to the consortium. BlackBerry now has a six week window where the consortium conducts due diligence and the company can find a better offer.

Previously: BlackBerry's tough spot: Keep enterprises, find buyer pronto | BlackBerry confirms 4,500 jobs cuts, slashes device portfolio

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Under the letter of intent, which BlackBerry signed, Fairfax and its consortium would acquire the shares Fairfax doesn't own with cash. Fairfax is a major Canadian financial company.

Now the deal will be evaluated by BlackBerry's special committee to review strategic alternatives. The due diligence is expected to be complete by Nov. 4.

It's unclear what the consortium's plans for BlackBerry would be. BlackBerry said that it plans to focus on the enterprise and specifically security and mobile device management. On Friday, BlackBerry said it will cut 4,500 jobs, report sales of $1.6 billion (nearly half what was expected) and take a massive writedown due to BlackBerry Z10 inventory. The plan: BlackBerry will circle the wagons around its enterprise and prosumer business and drop the consumer dream. The challenge with BlackBerry's plan: Enterprises would worry about the company's financial footing. 

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.

News of the letter of intent may avert enterprise defections at least for a bit and provide a floor to BlackBerry's valuation. If BlackBerry's smartphone business and stock price unraveled, its enterprise ambitions could be derailed. 

Topics: BlackBerry, Mobility, Smartphones

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12 comments
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  • A sad way for Blackberry to go

    I wish the Blackberry board would let the platform die with a bit of dignity. Instead, they are going to go private and force BB10 to slowly wither in the enterprise while WP8 and BYOD kills them off entirely.
    skyledavisbooks
    • Nah. Here's how you run BlackBerry into the ground:

      First, you sell them to HP, then they tinker around with it, next, they sell off the resulting products at Black Friday bargain basement prices so that ameteurs can load Android x86, and finally you sell the resulting OS to a TV manufacturer, like LG.
      Richard Estes
  • BlackBerry going down the tube?

    Projected revenue in 2015 is still USD 8 BILLION. That is not trivial. And Macqarie's estimated share value (USD 7.02) seems to be on the low side, since Fairfax are offering 9.00.
    DAS01
    • Yes, but what about profits?

      Revenue may still be fairly high, but how much of that is being eaten up in R&D, marketing, developer recruitment, etc.? Blackberry doesn't have a steady revenue stream to cover those costs. Handset sales are going down, not up. It may take five years, but barring some unexpected change (which can and will happen), Blackberry will eventually fade away. That's what I mean by a graceful exit.

      -S. Kyle Davis

      (incidentally, why are all posts showing up as anonymous?!)
      skyledavisbooks
  • Enterprises are only interested in getting out now.

    Not running BES for android clients or anything else. Just looking for the best path away from all things BB. This is good news only in that it is a temporary floor for shareholders but how good is this news for those who bought above this? Seems like it's a ceiling as well. There isn't going to be completion driving it up. My guess is Fairfax will be selling the patents and having a fire sale for everything else. Other this just became bad news for a different set of Canadians.
    Johnny Vegas
  • Sad day for Canadian engineering

    Nortel was the last of the 6 great telecommunication companies (Nortel, ATT/Bell Labs/Lucent tech, Siemens, Ericsson, Motorola, Nokia - Alcatel does not count since it is new and smaller) that created (starting with ATT, Ericsson, Siemens etc) and then nurtured the terrestrial and cellular communications revolution.

    5 of those 6 companies died after the last great communications industry bust of 2000-2003. Of course, the dying time was long ranging for almost a decade. Only Ericsson and now Huawei (a newer entrant) are still holding out.

    Meanwhile the commoditization of the mobile handset industry has now begun. Let us call this the 'Great Communications Bust of 2013-2016'. I have already written about the disappearance of HTC, Motorola, Nokia, Sony and Blackberry by the end of 2014 or 2015 in the mobile industry.

    Motorola has been dying or is on the deathbed. Same with Nokia's mobile handset division. It is dying and Microsoft decided to keep it alive as did Google with Motorola.

    Blackberry is now on its last few months or quarters of dying. HTC puts on a makeup and does not reveal it is dying. It will suddenly disappear by end of this year 2013 or Q3 2014.

    That leaves Sony mobile, LG mobile, Lenovo, Huawei and of course Samsung and Apple. Only Samsung and Apple will reap the most profits while the other companies will exit the handset industry to offset losses and to diversify away from the industry.

    Apple's so called success with iPhone 5S or 5C does little to reveal the massive haemorraging nature of the mobile industry. The microeconomic death spiral has begun and if Apple thinks that temporary success of 2013 or 2014 will help it survive into 2017 or even 2018, then good for them. But business history is against them.
    calahan
  • This is what going to happen

    To any mobile company that is slow to innovate.
    Koymik
    • @ Koymik

      You have to let me know who you think has innovated in the last few years in the mobile handset space. While Apple indeed innovated with putting in a touch screen and an app ecosystem around a phone, what other business innovations have they brought to market to get the moniker 'innovator'?

      The reality is this - Apple makes Veblen goods. It has learnt to milk the cow of conspicuous consumption from the low end, mid end and high end consumer space.

      The iPhone has nothing to do with it being a PC maker or a hardware innovator or a touch gesture creator or glass display innovator. It is actually a Veblen good and we do not know how long that will last.

      The alternative theories to monetary/neoclassical/neokeynsian economics include institutional and behavioral economic and evolutionary economics models. These can explain why Apple thrives in an environment when it should not. But evolution also shows that contrary nature can change too.

      Apple's product lineup should be seen as a temporary and transitional one for the whole device ecosystem. Microsoft has ceded the phone market prefering to focus on the tablet market (though they have not outed their 7"-8" tablet yet). And they believe in zero sum games. If Apple makes money from 8" iPads and 5" iPhones, then Microsoft may not enter that market seriously enough prefering to focus on 11" tablets and 15" and beyond laptops. But this does not imply that things can change. Transitional devices are just that. They come and go. So watch out for more disruption at the high and low ends as time passes.


      The stock and investor market may be fooled into thinking that Jobs has been effectively replaced with a team that can replicate Jobsian business innovation. What they have actually done is replace product innovation with distribution innovation. And this will run its course for another year before gloom sets back in on that investor segment.
      calahan
  • This sets the bottom price - Maybe someone else will make an offer

    I don't see the top end going above 5.5 B though. And yes whoever buys it will be dismantling the parts for what they can get out of it. Any profitable units will be milked for all they are worth until it fades into nothing.

    A number of companies operate shrinking businesses with a strategy of cutting expenses faster than they lose revenue to remain profitable on the long painful ride down to closing the doors for good. Its really great working under these conditions... NOT.

    BB doesn't have a lot of wiggle room though, this may end sooner than many think.

    Like surfing, when the wave peters out you either have to find another one or head to shore.
    greywolf7
  • BlackBerry going down the tube?

    Further to my recent post saying that USD 8 billion turnover was not trivial (which is, true, of course), but I had overlooked the USD 1 billion loss, which is not trivial either...

    So why might Mike Lazaridis have considered bidding for it? (The article was published just before the Fairfax annoucement, I think.)

    http://www.pcmag.com/article2/0,2817,2424686,00.asp

    What does he know others don't? Triumph of hope over reality? Would he have the heart to dismantle his creation?
    DAS01
  • BlackBerry Patents – Another Hi-Tech Treasure Trove?

    BlackBerry Patents – Another Hi-Tech Treasure Trove?
    Part 1 http://lnkd.in/X-sbuR
    Part 2 http://lnkd.in/bznSrdM
    Part 3 http://lnkd.in/bEm9J-S
    tchipworks
  • Blackberry -- It's Not Over Until It's Over!!!

    As a long time BB user, I'm not impressed by the alternatives offered by Samsung, Apple and Nokia (Galaxy, iPhone, & Windows Phone). Sure, they have interesting "bells & whistles" but for those of us who place a great deal of emphasis on productivity output (typing) the Blackberry Qwerty keyboard is one of the best for this purpose. In addition, to productivity output, BB produces some of the most "durable" handsets around. I have dropped my BB's several times on a variety of surfaces and they have never failed to keep operating. Samsung has recently launched a line of more durable phones because they understand the importance of durability. I love being able to expand a phone's memory storage capability by using a simple SD card which comes in handy when you're working on an important lenghty document. As far as network security is concerned, BB has one of the best infrastructures around which is "highly valued" by organizations that regularly transmit "highly sensitive" data. I'm not surprised another Canadian company made a bid for this company because they know despite being hammered by the competition, if properly "tweaked", this company still stands a chance to regain lost ground. The iPhone and Galaxy phones are marketed primarily to young people who are very "fickle" and brand conscious. All BB has to do is launch a much more effective campaign to interest these users and Voila!
    Gail Cooper