BlackBerry To Go Private
In a move that surprised no one, smartphone maker Blackberry (NASDAQ: BBRY) has signed a letter of intent to sell itself to a consortium of investors led by Fairfax Financial Holdings, Ltd. (TSE: FFH). The company had to do something as it has seen its fortunes steadily go downhill since Apple (NASDAQ: AAPL) launched its iPhone series in 2007. Prior to that, BlackBerry was the ‘must have’ smartphone. To put things into perspective, Apple recently sold over nine million iPhones in three days. BlackBerry sold 5.9 million smartphones in the second quarter of this year.
This year’s launch of BlackBerry 10, was supposed to revitalize the brand and entice customers who had gone to the iPhone back to the fold. But the phones have been an exercise in futility; failing to turn the company around. At their zenith in the fall of 2009, BlackBerry’s smartphones had global market share of over 20 percent. Since then, market share has dwindled to just 1.5 percent.
Finalization of the deal will mark the end of BlackBerry as a publicly traded company. Trading of the company’s stock was halted ahead of the news on Monday. On Friday, BlackBerry shares plummeted after the company declared a loss of nearly $1 billion. And in a bid to shrink its way to profitability, BBRY announced the layoff of nearly 4,500 workers. The loss of 4,500 employees represents a whopping 40 percent of the company’s workforce. Just when you wonder if things could get any worse, the company also made it clear on Friday that it would concentrate on proffering only two high end devices and two entry level handsets.
The deal with Fairfax was probably the best thing for the beleaguered company, but you have to wonder if going private will save the smartphone pioneer. Fairfax is currently BlackBerry’s largest shareholder, holding nearly 10 percent of the company. It had been rumored to be a potential suitor for months. Under the terms of the agreement, BlackBerry shareholders will receive $9 in cash per share, assessing the transaction at $4.7 billion. The syndicate will attain the outstanding shares of BlackBerry not controlled by Fairfax, while Fairfax intends to add its 10 percent stake to the transaction. The consortium of investors is seeking financing from Bank of America (NYSE: BAC) and BMO Capital Markets (NYSE: BMO) to complete the deal. The other partners of the group remain a mystery.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.