BlackBerry going private for $4.7 billion. Well, maybe.
FORTUNE — BlackBerry BBRY today announced that it has agreed to be acquired for $4.7 billion by Fairfax Financial, a Toronto-listed insurance company that currently holds around 10% of the company’s stock.
The $9 per share deal represents an 8.95% premium over where BlackBerry opened trading this morning, albeit well below where it was trading just one week ago (when it opened at $10.41 per share). For the month, BlackBerry’s average trading price had been $10.59 per share.
Here is the company’s year-to-date stock chart:
Fairfax is said to be leading an investor consortium, although no identities of other equity investors were disclosed. BofA Merrill Lynch BAC and BMO Capital Markets BMO would arrange the debt financing, although neither has made firm commitments yet.
It also is important to realize that this is a letter of intent agreement, which means that it is subject to due diligence. Just last week, BlackBerry stunned the market by warning of a $1 billion quarterly loss (3x analyst expectations), plans to lay off 4,500 employees and a reduction in future product offerings. If Fairfax finds even worse news on the horizon, it could still pull out.
If BlackBerry manages to find a superior offer before a definitive agreement is signed with Fairfax, then the mobile device maker would be required to pay a termination fee of around $155 million. It would rise to $257 million were there to be such an agreement in place. Both termination fees require that Fairfax has not lowered its offer below $9 per share. Conversely, Fairfax does not have to pay BlackBerry anything if it pulls out of the process.
Prem Watsa, chairman and CEO of Fairfax (and also a former BlackBerry board director), said the following in a prepared statement: “We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. 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.”
That’s a whole lot of confidence, given that Fairfax hasn’t ever done a deal like this before. According to the CapitalIQ database, the company’s largest M&A transactions have all been for less than $2 billion — with no control stakes in the technology sector.
Perhaps Fairfax was attracted to the BlackBerry balance sheet, which currently features zero debt. Or maybe there is some sort of Canadian nationalism in play here. But it’s kind of hard to imagine right now that an insurance company (with a handful of retail and restaurant assets) has figured out a workable investment thesis for a dying smartphone company that every private equity firm and strategic tech acquirer has passed on.
BlackBerry shares stopped trading in advance of the announcement, but are set to resume trading at 2pm ET. The company’s shares hit an all-time high in June 2008, when they traded at $144.56 per share.
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