Beleaguered handset maker BlackBerry has announced that it has signed a letter of intent agreement to receive a buyout offer by a consortium led by Fairfax Financial Holdings Limited. The consortium intends to take the company private subject to due diligence, negotiation and execution of a definitive agreement and customary regulatory approvals.
As per the agreement, all BlackBerry shareholders will receive $9 in cash for each BlackBerry share, in a transaction valued at around $4.7 billion. Fairfax currently owns 10% of BlackBerry’s common shares and the consortium intends to acquire all the outstanding BlackBerry shares not held by Fairfax for cash. BlackBerry noted that it has also received the board approval for this transaction.
The due diligence is expected to be completed by November 4, 2013, by which the consortium intends to negotiate and execute a definitive transaction agreement. Note that Fairfax does not have financing for this agreement yet and it is seeking investment from Bank Of America (BofA) Merrill Lynch and BMO Capital Markets for this transaction. It has also not disclosed other members of the consortium.
BlackBerry Open To Look For Alternative Deals: During the due diligence period, BlackBerry can request, receive, evaluate and potentially enter into negotiations with other parties for alternative proposals, but the Fairfax consortium also has the right to match the offer.
If BlackBerry does back out from the deal and accepts a rival offer, it would have to pay a termination fee of $0.30/share to Fairfax, however it doesn’t have to pay anything if the consortium reduce the offer from $9/share without the BlackBerry’s board approval. The fee will increase to $0.50/share if the company has signed a definitive agreement with Fairfax. This fee is applicable if:
– BlackBerry signs a letter of intent or a definitive agreement for an alternative transaction.
– A rival offer is publicly announced and consummated within 6 months following the due diligence period.
– BlackBerry signs an alternative offer from a person with whom discussions were held before or during the six weeks due diligence period.
– BlackBerry ceases to negotiate in good faith to enter the definitive agreement by the end of the due diligence period.
BlackBerry Restructuring: This offer comes after BlackBerry announced that it will be laying off 40% of its global workforce (around 4,500 employees) as part of its restructuring plans last week.
The company also mentioned that it will be taking a step back from the consumer market to re-focus on the enterprise and the professional consumer (prosumer) market and change its future smartphone portfolio from six to four devices which will include two high-end devices and two entry-level devices.
Tweets About BlackBerry Buyout Offer
Blackberry bought out for $4.7bn, which is less than Apple’s revenue from iPhones in the last 3 days.
— Benedict Evans (@BenedictEvans) September 23, 2013
thorsten heins greatest achievement will be convincing someone to pay $4.7bn for BlackBerry in its current state. http://t.co/cE0qk0yJw7
— Dan Seifert (@dcseifert) September 23, 2013
Of the four smartphone makers called out in iPhone event Jan 2007 all four have now exited smartphone business. It took less than 7 years.
— Timo Koola (@tkoola) September 23, 2013
Blackberry sells for 4% of its (brief) value six years ago. If you need a marker of how fast things are changing.
— Quentin Hardy (@qhardy) September 23, 2013
Blackberry’s market cap was once $80B. Now it’s proposing selling for $4.7B. Damn you, Innovator’s Dilemma!
— Aaron Levie (@levie) September 24, 2013