Consortium led by Toronto based ‘Fairfax Financial’ begin due diligence ahead of proposed $4.7 billion (£3billion) purchase of struggling manufacturer
BlackBerry has moved a step closer to being sold after agreeing a $4.7 billion (£3 billion) deal with Toronto based firm, Fairfax Financial Holding Limited.
The struggling manufacturer confirmed last month it was looking to offload the business, and announced this evening (September 23) it has now signed a “letter of intent” with the Toronto based firm
Fairfax, already a major shareholder in BlackBerry with around 10 per cent of the business, has been ‘permitted’ six weeks to conduct due diligence of the firm, which is expected to be complete by November 4.
Canadian firm BlackBerry, formed in 1984, can however speak with other interested parties during this process to achieve the “best possible outcome.”
BlackBerry shareholders would receive $9 per share in cash as part of the deal, the firm revealed.
The announcement comes just hours after the firm announced it was cutting a further 4,500 jobs globally as it looks to exit the consumer market. Full story here. The cuts take staff losses to around 10,000 in the past year. Fu
Chair of BlackBerry’s Board of Directors Barbara Stymiest said: “The Special Committee is seeking the best available outcome for the Company’s constituents, including for shareholders.
“Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium.”
Fairfax Chairman and CEO Prem Watsa said: “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.”
Comment
CCS Insight chief of research Ben Wood described the proposed $4.7 billion sales of BlackBerry as a “new chapter” for the manufacturer, but expects more bids to arrive over the next six weeks.
“At this stage further bids on BlackBerry’s assets cannot be ruled out, but this certainly marks a new chapter in the destiny of the company whether this bid is accepted or a rival offer materializes.”
“Private ownership will provide breathing space as strategic options are assessed. Early indications suggest a focus on the business market. Wider structural changes such as spinning off BlackBerry Messenger (BBM) and retrenching from hardware will likely be carefully reviewed.”
“The profit warning on Friday was a clear indication of the extreme difficulties BlackBerry faces in the hyper-competitive mobile devices business. This latest bid underlines the seriousness of the company’s situation. By going private, the structure and purpose of the company can be redefined behind closed doors.”
“Irrespective of this bid, questions around BlackBerry’s future remain unchanged. It seems unlikely it can continue as it is and while the most attractive option is to focus on business users, tough decisions will need to be made about which parts of the business to persevere with and which pieces to spin off or abandon.”
BlackBerry Limited (NASDAQ:BBRY; TSX:BB) today announced it has signed a letter of intent agreement (“LOI”) under which a consortium to be led by Fairfax Financial Holdings Limited (“Fairfax”) has offered to acquire the company subject to due diligence.
The letter of intent contemplates a transaction in which BlackBerry shareholders would receive U.S. $9 in cash for each share of BlackBerry share they hold, in a transaction valued at approximately U.S. $4.7 billion. The consortium would acquire for cash all of the outstanding shares of BlackBerry not held by Fairfax. Fairfax, which owns approximately 10 percent of BlackBerry’s common shares, intends to contribute the shares of BlackBerry it currently holds into the transaction.
The BlackBerry Board of Directors, acting on the recommendation of a special committee of the board of directors (the “Special Committee”), approved the terms of the LOI under which the consortium, which is seeking financing from BofA Merrill Lynch and BMO Capital Markets, would acquire BlackBerry and take the company private subject to a number of conditions, including due diligence, negotiation and execution of a definitive agreement (the “Definitive Agreement”) and customary regulatory approvals.
The Special Committee, chaired by Director Tim Dattels, was formed in August 2013 to review strategic alternatives for the company. J.P. Morgan and Perella Weinberg are acting as financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP and Torys LLP are acting as legal advisors.
Diligence is expected to be complete by November 4, 2013 (“Diligence Period”). The parties’ intention is to negotiate and execute a definitive transaction agreement by such date. During such period, BlackBerry is permitted to actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals (“Alternative Transactions”).
If (A) during the Diligence Period (i) BlackBerry enters into any letter of intent or definitive agreement providing for an Alternative Transaction, (ii) BlackBerry ceases to negotiate
with the consortium in good faith with a view to entering into the Definitive Agreement by the end of the Diligence Period, or (iii) an Alternative Transaction is publicly proposed or publicly announced and is consummated within 6 months following the end of the Diligence Period, or (B) during the 3 month period following the end of the Diligence Period, BlackBerry enters into any agreement providing for an Alternative Transaction with a person with whom discussions were held before or during the Diligence Period, then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share, provided, however, that no such fee shall be payable if the consortium shall have reduced the price offered below U.S. $9.00 per share without the approval of the board of directors of BlackBerry. In the event that a definitive agreement is signed with Fairfax the termination fee will increase to U.S. $ 0.50 per share.
Barbara Stymiest, Chair of BlackBerry’s Board of Directors, said: “The Special Committee is seeking the best available outcome for the Company’s constituents, including for shareholders. Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium.”
Prem Watsa, Chairman and CEO of Fairfax, said: “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.”
In addition to the consortium and its lenders being satisfied with all aspects of the due diligence to be carried out by them during the Diligence Period and the negotiation and execution of a binding definitive agreement approved by the board of BlackBerry, completion of the transaction will be subject to other customary conditions, including receipt of required regulatory approvals. There can be no assurance that due diligence will be satisfactory, that financing will be obtained, that a definitive agreement will be entered into or that the transaction will be consummated.
BDT & Company, LLC, BofA Merrill Lynch and BMO Capital Markets are acting as financial advisors, and Shearman & Sterling LLP and McCarthy Tétrault LLP are acting as legal advisors to Fairfax in connection with the transaction.
