BlackBerry finds sugar daddy


Fairfax Financial offers $4.7 billion for the company

BlackBerry has announced it has signed a letter of intent agreement to be bought by consortium Fairfax Financial for $4.7 billion, subject to a successful due diligence process.

The letter of intent involves a transaction that will take BlackBerry private.

Fairfax Financial's offer means BlackBerry shareholders would receive $9 in cash for each share of BlackBerry share they hold. The consortium would acquire for cash all of the outstanding shares of BlackBerry not already held by Fairfax.

Fairfax, which currently owns approximately 10% of BlackBerry's common shares, intends to contribute the shares of BlackBerry it currently holds into the transaction.

However, Jan Dawson, chief telecoms analyst at Ovum, commented: 'Taking BlackBerry private doesn't solve the fundamental problems at the company. First, the company's device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business.

'BlackBerry's supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It's likely that BlackBerry will be out of the device business entirely by the middle of next year.'

The BlackBerry Board of Directors, acting on the recommendation of a special committee of the board of directors, approved the terms of the letter of intent under which the consortium, which is seeking financing from BofA Merrill Lynch and BMO Capital Markets, would acquire BlackBerry and take the company private subject to a number of conditions, including due diligence, negotiation and execution of a definitive agreement, and customary regulatory approvals.

Dawson added that if the device business closes, the future is even bleaker for BlackBerry: 'The next challenge is that BlackBerry's other businesses are all to a greater or lesser extent dependent on its devices business. BlackBerry Messenger's installed base is entirely on BlackBerry devices, and its launch on iOS and Android was aborted over the weekend. Its mobile device management business is entirely based on its ability to manage BlackBerry devices, and its cross-platform management is much less well established than those of major competitors like MobileIron and Airwatch. If you strip out BlackBerry's use of its QNX operating system for BlackBerry devices, you're left with a business that's worth less than $100 million. About the only part of BlackBerry that looks to be worth a significant amount at this point is its patent portfolio, and that certainly wouldn't justify the purchase price on its own.'

Dawson added: 'Unless Fairfax plans to radically change or accelerate BlackBerry's strategy, it's unlikely to be able to turn the company around. And that means we're likely seeing the beginning of the end for one of the most iconic brands in mobile technology.'

Diligence is expected to be complete by 4 November 2013.


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