Fairfax Financial will play a role in the new BlackBerry Ltd. – but it won’t be as owners.
Beleaguered BlackBerry announced it has abandoned plans to sell itself and will instead replace its chief executive officer and raise $1 billion from institutional investors – one of those being Fairfax Financial Holdings.
“Today’s announcement represents a significant vote of confidence in BlackBerry and its future by this group of preeminent, long-term investors,” said the chair of BlackBerry’s board Barbara Stymiest. “This financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position.”
Fairfax had until 5 p.m. Monday to come forward with a more definitive offer its initial $4.7 billion takeover bid it presented six weeks ago. Instead, the Waterloo-based smartphone maker will raise with a private placement of convertible debentures – with Fairfax taking up $250 million of the debentures, according to a press release from BlackBerry.
Some in the insurance industry had doubts that the Fairfax bid would go through (see "Back Fairfax Bid?")
BlackBerry put itself on the auction block when its new operating system failed to recapture ground lost to Apple Inc.’s iPhone and Google Inc.’s Android software devices.
Under the new agreement, CEO Thorsten Heins will step down, allowing former Sybase AG CEO John Chen to step in and take charge of BlackBerry’s strategy. (continued.)
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Fairfax had been seeking over $1-billion (US) of equity investments from institutional investors to back its takeover bid in late September. Those familiar with the discussions told reporters that Fairfax’s chief Prem Watsa has personally contacted several leading Canadian and U.S. pension and private equity funds to win support for a highly conditional overture.
The potential acquisition was pitched as a leveraged buyout that would be financed with more than $3-billion of bank loans, $1-billion of equity from institutions and Fairfax’s nearly 10-per-cent stake in BlackBerry. That stake is currently valued at about $470-million.
