The Canadian handset maker announced yesterday that it will be going private after signing a letter of intent to sell itself to a consortium led by Fairfax Financial Holdings for $4.7 billion.
Earlier on Friday, BlackBerry announced that it would likely incur losses of $1 billion for the most recent quarter. This was mainly due to the fact that it has overestimated the number of devices it would sell, which led to an inventory charge of as much as $960 million. Microsoft was at a similar stage last year and had to write off a billion dollars of unsold Surface RT tablet inventory. However, BlackBerry has neither the cash reserves nor the marketing muscle to turn things around.
BlackBerry’s buyout by Fairfax Financial means that the shareholders will get $9 for every share they own, which is a measly sum when seen against the $147.77 a share its stock was fetching in its heyday in 2008. Before trading was halted, BlackBerry’s shares were valued at $8.23. Most of the slide can be attributed to an ever-changing mobile environment, in which BlackBerry’s significance has slowly been fading. The rise of iOS and Android has hit manufacturers like Nokia and BlackBerry hard, and they had to scramble to stay relevant in the market. Ultimately, it was devices like the BlackBerry Z10 that sealed its fate as the device failed to find any significant consumer attention.
Fairfax had been buying BlackBerry stock since 2010, and currently has a 10% stake in the organization. Prem Watsa, the Indian-born billionaire and CEO of Fairfax, was a member of the board at BlackBerry and had resigned last year due to potential conflicts that might arise over a sale. The buyout would mean that BlackBerry will withdraw from the consumer market, and would focus on secure enterprise solutions.
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.”
Due diligence for the deal is set to be finished by November 4th, and the consortium is financing the deal through Bank of America Merrill Lynch and BMO Capital Markets.