Blackberry has agreed to sell itself to a consortium led by its largest shareholder and go private in an attempt by the beleaguered Canadian mobile phone manufacturer to salvage its business. The deal values a company that was worth more than $80bn (£50bn) as recently as 2008 at a mere $4.7bn.
Days after company warned the stock market it was running up a massive quarterly loss of almost $1bn and preparing to lay off over a third of its global workforce, Blackberry’s shares were suspended on Monday as an announcement went out confirming that the firm had signed a letter of intent with a consortium of buyers led by Fairfax Financial, its biggest shareholder with about 10 per cent of the stock.
The possibility of a rescue deal involving the Canadian insurance conglomerate was first raised earlier this summer when Fairfax Financial’s head, Prem Watsa, gave up his post on Blackberry’s board of directors, citing potential conflicts of interest. The Indian-born Mr Watsa is a prominent investor often called “Canada’s Warren Buffett”.
But recent speculation focused on a different outcome: a potential deal involving Mike Lazaridis, the company’s co-founder and former co-chief executive, who was reported to be talking to the private equity groups Blackstone and Carlyle about lining up a bid.
The Fairfax offer values Blackberry’s shares at $9 apiece. The stock was worth more than $10 apiece at the close on Thursday but plummeted on Friday when the company announced that it was on track to post a crushing quarterly loss and planned to axe 4,500 jobs, including at its UK base in Slough.
The deal, which is subject to due diligence, has been approved by Blackberry’s board. But, according to the company’s announcement, the Fairfax consortium is still “seeking financing from BofA Merrill Lynch and BMO Capital Markets.”
Moreover, there remains the potential for a rival bid, with Blackberry allowed to solicit other possible buyers while Fairfax conducts due diligence.
The agreement between Blackberry and Fairfax is a milestone in the company’s rapid decline from the undisputed leader in the smartphone business to an also-ran desperately trying to win over customers tempted by Apple’s iPhones or Samsung’s Galaxy series of devices.
The figures are startling: according to IDC, a research firm, smartphones phones running on Blackberry’s operating system (OS) will end up with a worldwide market share of 2.7 per cent this year, against 75.3 per cent for phones running Google’s Android system, which powers Samsung’s phones, among others.
Apple’s iOS operating system, which drives the iPhone, has a nearly 17 per cent share. By 2017, Blackberry OS’s market shares is expected to fall to 1.7 per cent. Back in 2009, Blackberry had more than 20 per cent of the market.