BlackBerry Sold to Fairfax Financial Holdings

But can the company still manage a turnaround?

   

With the number of potential suitors seemingly shrinking every day, the odds were looking slim that BlackBerry (BBRY) would ever be sold.

But today the company announced that it beat the odds and brokered a deal with Fairfax Financial Holdings (FRFHF) that will see a Fairfax-led equity consortium pay $9 per share for the troubled Canadian company. The deal is subject to due diligence by the purchasers with a November 4 date for a final agreement.

In the meantime, BlackBerry can continue seeking out other potential buyers — not that they’re lining up for the chance — although co-founder Mike Lazaridis was reportedly trying to line up equity partners for his own bid as recently as last Friday.

If approved, the deal would value BlackBerry at roughly $4.7 billion and represents just a slight premium over its current stock price. In comparison, in 2008 at the height of its domination of the smartphone market — and before Apple’s (AAPL) iPhone and devices running Google’s (GOOG) Android won over the consumer market — the company was valued at $77 billion.

When BlackBerry announced it was putting itself for sale in August, board member Prem Watsa, the chairman and CEO of Fairfax Financial, resigned his seat, citing a potential conflict of interest. This move fueled speculation that Watsa and Fairfax (which already owned about 10% of BlackBerry shares) intended to make a play to buy the company.

According to the Globe & Mail, a “significant amount” of the equity involved is going to come from Canada, and there are no other technology firms involved in the deal. This means there is to be no attempt to fold BlackBerry handsets, BB10, BlackBerry Messenger or the company’s secure network into a company like IBM (IBM) or Lenovo (LNVGY) as has been speculated.

It also means the deal is likely to pass any Canadian government scrutiny, a concern given BlackBerry’s current use within sensitive Canadian and U.S. government agencies and the Canadian government’s desire to avoid losing what was once the country’s leading high-tech company — a particular sore point since the collapse of Nortel.

Going private offers BlackBerry the ability to craft its latest turnaround plan without having every step scrutinized by the technology press and angry shareholders. This should help to reduce the pressure on the company’s leadership (CEO Thorsten Heins has had to spend an inordinate amount of time defending the company and its products instead of managing BlackBerry), but whether that will be enough to ultimately save BlackBerry remains an open question.

Even with its expected strategic shift away from consumers, back to its core enterprise customers, it may be too late to save BlackBerry as we know it.

The company has all but given up on the consumer market (so-called “prosumers” aren’t enough to keep it alive), but with the continued popularity of the BYOD — bring your own device — movement, those enterprise customers continue to phase out BlackBerry in favor of letting their employees supply their own devices. And those people want iPhones, Android phones or even Windows Phones.

The future remains cloudy for BlackBerry even as a privately owned company; this latest development could be the start of the resurgence that didn’t happen in 2013, or it could mark the beginning of the final chapter in the company’s long history.

What is certain is that pretty much anyone who invested in the company in the past year expecting a turnaround is going to lose money if the deal goes through. But at least they’ll get out with something, and the stomach-churning ride will finally be over.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/09/finally-blackberry-sold-to-fairfax-financial-holdings/.

©2014 InvestorPlace Media, LLC

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