After announcing on Friday that it would be laying off 40% of its workforce and that it anticipated a loss of nearly $1 billion, BlackBerry today announced that it has signed a letter of intent to be acquired by a group led by Fairfax Financial Holdings. The transaction values BlackBerry at $4.7 billion, or $9 per share, a premium of approximately 3% above Friday's closing price, but lower than Thursday's closing price of $10.52.
The Toronto-based Fairfax currently owns approximately 10% of BlackBerry and has been given a six-week due diligence period before the transaction can be completed. In addition, BlackBerry has been given the same amount of time to explore alternative proposals. In the event that BlackBerry does not continue with Fairfax's offer, it will be required to pay $0.30 per share to Fairfax, or approximately $150 million.
Fairfax founder and CEO Prem Watsa is a former BlackBerry board member. He stepped down when BlackBerry announced it was considering a sale last month. Watsa is one of Canada's best-known value investors.
"We believe this transaction will open an exciting new private chapter for BlackBerry its customers, carriers and employees," Watsa 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."
Founded in 1985, Fairfax is a Canadian financial services company that engages in the insurance business and investment management. Its corporate objective is "to achieve a high rate of return on invested capital and build long-term shareholder value." The expected deal will be financed through the efforts of Bank of America Merrill Lynch and BMO Capital Markets. BlackBerry and Fairfax intend to finalize their deal by Nov. 4.
BlackBerry was founded in 1999 and in 2008 had a market capitalization of over $80 billion. Its shares have fallen approximately 24% this year alone. Trading of the company's stock was halted ahead of the news today.
-- Material from The Associated Press was used in this report.
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