BlackBerry
announced Monday it has agreed to a $4.7 billion buyout by a consortium
of investors who plan to take the struggling Canadian smartphone maker
private.
The company said in a statement that it has
“signed a letter of intent agreement under which a consortium to be led
by Fairfax Financial Holdings Limited has offered to acquire the company
subject to due diligence.”
Fairfax, a Canadian firm headed by
billionaire Prem Watsa, is already BlackBerry’s largest shareholder with
approximately 10 percent of its shares. Watsa resigned from
BlackBerry’s board when it announced in August its intentions to search
for a suitor.
Under the proposed deal the consortium would offer
$9 for each outstanding share, and Fairfax would contribute its own
shares in the transaction.
BlackBerry said its board of directors support the plan.
A
firm deal, once due diligence is completed, is expected to be announced
by November 4. It hinges also on the consortium obtaining financing.
BlackBerry said it would continue a search for a possibly better suitor in the interim.
BlackBerry
stock was down six percent to $8.23 before trading was halted just
prior to its announcement. Its shares climbed back up to $9.07 in
afternoon trading.
Analysts meanwhile reacted with measured optimism.
“This
is probably the best possible outcome of several unattractive options
for BlackBerry,” said analyst Jack Gold of J. Gold Associates.
While
BlackBerry helped create a culture of mobile users who were glued to
the company’s smartphones, many of those customers have since moved to
Apple iPhones or other device makers such as Samsung, mainly using
Android.
According to International Data Corporation (IDC),
BlackBerry’s global market share had slipped to 3.7 percent in the
second quarter, the lowest since tracking began, while Android accounted
for nearly 80 percent.
The company formerly known as Research In
Motion unveiled a new corporate name and a new platform in January as it
sought to regain momentum, but its most recent numbers suggest this has
been a spectacular failure.
On Friday, the company announced it
was laying off 4,500 staff or one-third of its global workforce after a
dismal launch of new smartphones earlier this year that were meant to
revive BlackBerry.
It also said it expected to post a nearly $1
billion loss in the second quarter due to writedowns linked to poor
sales of its new Z10 touchscreen smartphone, a device aimed specifically
at competing against Apple and Android devices.
Gold and other
analysts said going private — and possibly returning company founder
Mike Lazaridis at the helm, as has been rumored — would give the company
breathing room to “put the house in order.”
Going forward,
BlackBerry would be a much smaller player in handheld devices, but
“being private would mean that Wall Street is not continuously breathing
down their neck,” said Gold.
Furthermore, its key enterprise
customers may not feel as compelled to replace their BlackBerry
smartphones and servers for fear that the company is going out of
business.
“It could provide them with cover to re-architect the company even more than they are now,” said Gold.
The company’s sustainability, however, still remains in doubt for most.
AFP
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