After a last-ditch effort to stay competitive in the smartphone market failed, BlackBerry Ltd. said Monday that it struck a preliminary deal in which a group led by a former board member will take the company private for about $4.7 billion.
The letter of intent would see a group led by Fairfax Financial Holdings Ltd. pay $9 a share in cash for all of the BlackBerry shares not already held by Fairfax. The firm currently holds about 10% of BlackBerry’s shares.
Following the news BlackBerry’s stock rose about 1.2% to $8.83.
The Waterloo, Ontario, company said its board has approved the proposed transaction. But 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 the deal.
“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 deal at this point, it would owe Fairfax a fee of 30 cents a share, or about $157 million. That fee would grow to about $262 million if the a definitive agreement is signed and BlackBerry walks away.
The announced deal comes only three days after BlackBerry pre-announced dismal second-quarter results, including plans to write down almost $1 billion in unsold phone inventory and layoff 40% of its employees. That news sent the stock down 17%.
More Info: WallStreetJournal
