BlackBerry to be sold to consortium led by Fairfax Financial Holdings

BlackBerry's new raft of handsets released earlier this year, including the Q10, above, did not sell as well as the financially troubled company had hoped they would and it was forced to undergo restructuring and start looking for potential buyers.

BlackBerry’s new raft of handsets released earlier this year, including the Q10, above, did not sell as well as the financially troubled company had hoped they would and it was forced to undergo restructuring and start looking for potential buyers. Geoff Robins/Canadian Press

Troubled smartphone maker BlackBerry has signed a provisional agreement to be bought by a consortium led by Fairfax Financial Holdings Limited, which already owns approximately 10 per cent of the publicly traded shares in the Waterloo, Ont.-based company.

Trading of the company’s shares was temporarily halted on the Nasdaq and the Toronto Stock Exchange early afternoon Monday after BlackBerry announced the deal, which is still subject to due diligence. Trading resumed around 2 p.m.

BlackBerry said in a news release that it has signed a “letter of intent agreement” under which the company’s shareholders would receive $9 US cash for each BlackBerry share they hold and the consortium would acquire, for cash, all of the outstanding shares ofBlackBerry not already held by Fairfax.

The consortium would take the company private.

Fairfax, a financial holding company based in Toronto, would contribute the shares it currently holds into the transaction, which is valued at approximately $4.7 billion and still subject to regulatory approval, the release said.

The consortium, which is reportedly seeking financing from Bank of America Merrill Lynch and BMO Capital Markets, has six weeks to conduct due diligence, during which time BlackBerry can seek better offers.

The due diligence is expected to be completed by Nov. 4,  and BlackBerry said Monday that it hopes to have a “definitive transaction agreement” in place by then.

But up until that date, BlackBerry can “actively solicit, receive, evaluate and potentially enter into
negotiations with parties that offer alternative proposals,” the company said.

“Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium,” said Barbara Stymiest, chair of BlackBerry’s board of directors, in the press release.

The board of directors has approved the provisional agreement on the recommendation of a special committee that was formed in August in order to feel out potential buyers and examine options for the financially struggling company.

The once mighty maker of mobile phones renowned for their purportedly unhackable secure communication systems has been undergoing restructuring ever since its new raft of handsets, released earlier this year, did not sell as well as the company had hoped they would.

On Friday, it announced it would be laying off 4,500 workers and reported disappointing financial results. Trading in BlackBerry shares was also halted for a brief period leading up to and following that announcement.

BlackBerry said on Friday that it expects to have a non-cash loss in the second quarter of this fiscal year of $930 million to $960 million, largely due to an inventory of unsold devices. It is due to report its quarterly financial results on Friday.

The stock market responded positively to the news of a possible sale, and the company’s stock was up more than one per cent and trading around $8.84 US on the Nasdaq

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