BlackBerry Strikes Preliminary Go-Private Deal for $4.7 Billion - Wall Street Journal

BlackBerry Ltd. said Monday it reached a preliminary deal with one of its biggest shareholders to try to take the company private for about $4.7 billion, kicking off a process to find better offers for the struggling company. Fairfax Financial Holdings Ltrd., a Canadian insurance firm, signed a letter of intent with the BlackBerry board where it could pay $9 a share in cash for the BlackBerry shares not already held by Fairfax. The firm holds about 10% of BlackBerry's shares. The deal is far from complete—it is subject to six weeks of due diligence until Nov. 4, and BlackBerry is entitled to shop the company during this period. The Fairfax group still needs to raise financing for its potential deal. There are other parties still considering making a bid for BlackBerry, though it was unclear how the Fairfax news would affect their deliberations, said one person familiar with the matter. Following the news BlackBerry's stock, which plunged 17% Friday after the company disclosed it had nearly $1 billion in unsold phones and would slash 40% of its workforce, rose about 1.2% to $8.83. The Waterloo, Ontario, company said its board has approved the proposed transaction. "The Special Committee is seeking the best available outcome for the Company's constituents, including for shareholders," BlackBerry chairwoman Barbara Stymiest 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." If BlackBerry backs out of the potential Fairfax deal or finds another buyer, it would owe Fairfax a fee of 30 cents a share, or about $157 million. That fee would increase to about $262 million if the a definitive agreement is signed and BlackBerry walks away. BlackBerry didn't say who, apart from Fairfax, would take part in the consortium, but according to people familiar with the matter, Canadian Pension Plan Investment Board and Ontario Teachers' Pension Plan could take part. Spokeswomen for CPPIB and the Ontario Teachers' declined to comment. Canadian pension funds will likely be involved in the deal, Fairfax Chairman and Chief Executive Prem Watsa told the Wall Street Journal Monday, without providing specifics. "I know most people don't think so, but we think over time [BlackBerry] can be successful again," Mr. Watsa said in an interview. "We think in a private setting this company can do well, without all the noise from the marketplace." Mr. Watsa acknowledged the company's latest poor quarterly results and said they will be looked at carefully. And he conceded that the pace at which BlackBerry was losing customers and market share—and burning cash—was a factor in the deal's timing. "We thought, every day that goes by, if the position of the company wasn't stabilized they would lose employees and customers, and we thought it was appropriate to do the deal [now]," Mr. Watsa said. "There have been some significant write-offs recently so we've got to understand that" before a deal is finalized. Even if the deal does go through, BlackBerry's future remains unclear. Mr. Watsa said the company's recently announced plan to re-focus on business customers "is the right way to go," but that the consortium has not decided whether or not the company's current management team will stay in place or whether BlackBerry will continue to make phones. "It's early days," Mr. Watsa said. BlackBerry's decision to sell to Mr. Watsa's group was finalized this weekend and led in part by a group of three new BlackBerry board members and a special board committee formed just last month to explore strategic alternatives. A deal will likely be seen as a concession that a plan put in place by Chief Executive Thorsten Heins to sell a new line of phones has fallen flat. Mr. Watsa stepped down from the board last month, stating he wished to avoid potential conflicts of interest during the company's strategic review process. "We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees," Mr. 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." BlackBerry said the consortium will seek financing from BofA Merrill Lynch and BMO Capital Markets. J.P. Morgan and Perella Weinberg are acting as financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP and Torys LLP are acting as legal advisers. –Ben Dummett in Toronto and Dana Cimilluca in New York contributed to this article. Write to Carolyn King at carolyn.m.king@dowjones.com via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEq14CotTHj9-5KnPJUs2xsuWdN4g&url=http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-335282/

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