BlackBerry said on Monday that it had reached an agreement to be taken private by a group led by Fairfax Financial Holdings.
The company signed a letter of intent that would pay shareholders $ 9 a share in cash, a deal that values the faltering smartphone maker at about $ 4.7 billion, according to a press release. Fairfax already owns 10 percent of BlackBerry.
BlackBerry entered into the agreement on the recommendation of a special committee of its board, which has been evaluating strategic options for the company as its market share has continued to erode in recent months.
Fairfax and its co-investors are seeking financing from Bank of America Merrill Lynch and BMO Capital Markets. BlackBerry and Fairfax agreed to complete due diligence by Nov. 4. During this time, BlackBerry is permitted to enter into talks with other potential acquirers. The press release did not identify the other investors joining with Fairfax
“The special committee is seeking the best available outcome for the company’s constituents, including for shareholders,” Barbara Stymiest, BlackBerry’s chairwoman, said in a statement. “Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium.”
BlackBerry’s special committee has taken advice from JPMorgan Chase and Perella Weinberg, as well as the law firms Skadden, Arps, Slate, Meagher & Flom and Torys.
“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees,” Prem Watsa, chief executive of Fairfax, said in a statement. “We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world.”
Mr. Watsa stepped down from BlackBerry’s board last month to avoid criticism over a potential conflict of interest as he sought to find a future path for the beleaguered company. Fairfax is its largest shareholder, with a 10 percent stake.
BDT & Company, Bank of America Merrill Lynch and BMO Capital Markets are advising Fairfax, and Shearman & Sterling and McCarthy Tétrault are providing it with legal advice.
On Friday, BlackBerry announced that it would lay off about 40 percent of its employees, 4,500 people, and report a $ 1 billion quarterly loss.
A new operating system and new phones that were supposed to have rejuvenated the companies have been a flop. Much of the quarterly loss will come from writing down the value of the company’s inventory of unwanted BlackBerry 10 phones.
While being privately held will allow BlackBerry to restructure without worrying about bad news affecting its share price, several analysts have questioned how it can remain in the phone business without access to open captial markets. Its competitors such as Apple and Google are among the most profitable and largest corporations in the world.
There has been speculation that BlackBerry might abandon the phone business to become a software vendor.