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With Blackberry deal dead, the hawks will come picking for the remains

“Delay” in Fairfax investment deal and ousting of ex-CEO Thorsten Heins means Fairfax’s due diligence found something nasty.

RIM CEO Thorsten Heins Speaks To Blackberry Conference In San Jose

Blackberry’s messiah has failed to exhibit the requisite messianic qualities.

Thorsten Heins, Blackberry’s CEO for one year and 10 months, has been shown the door as Fairfax unexpectedly backed away from a takeover deal early Monday Eastern Time. Heins will be replaced by John S Chen, former CEO of Sybase, as the company determines its perilous future.

And now come the hawks to pick through the remains.

Fairfax was supposed to complete its due diligence assessment Monday, a key milestone in the company’s takeover effort. While many expected this to go through, Fairfax stopped dead in their tracks and announced that it was no longer proceeding with the deal. Instead, as Blackberry announced Monday morning Eastern Time, Fairfax will lend it $1 billion in cash in convertible debt to buy shares at $10 apiece in the future — a hefty premium on the $6.30 they are currently trading for.

With that kind of equity in the company, Fairfax has some clout. They don’t own Blackberry outright but they have a commanding say in the company.The premium it is putting on the stock means it sees some value in the company. As an example to the possible value of parts of the company, in the era of popular chat apps such as WhatsApp in North America and WeChat (Wexin) and Line in Asia, there is still a market for Blackberry’s IP given the spike in popularity of BBM for Android and iPhone, not to mention the hefty patent portfolio the company currently holds. But as they’ve discovered through attempts to take the company private, there isn’t really a market for Blackberry as a whole. Fairfax determined it needed other partners to take it private, and they couldn’t convince any to come along for the ride.

Blackberry says the loan from Fairfax is for restructuring. Simply put: this is money to keep the company afloat as it takes itself apart and sells the relevant intellectual property and facilities to the highest bidder. As the company doesn’t have much money coming in, it will need all the cash on hand to finance itself during its wind-up. Lawyers fees and severance packages will cost a hefty sum.

Blackberry has long had its naysayers, but now it doesn’t look like there really isn’t much much hope left.

By this time next year Blackberry, once a Canadian dream, will be reduced to a Nortel-like holding company. A shell of its former self, only existing to finalize any deals for its various parts (caveat to this is if the Canadian government blocks the sale under the Investment Canada Act).

Rest in peace.

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