Entirely Anticlimactic, Fairfax Financial and Others Will Acquire BlackBerry for $4.7B

It is almost impossible to believe that just a few short years ago BlackBerry (then Research in Motion, or RIM) had a market cap of $80 billion. That peak came around 2008, when RIM shares split three for one and the stock shot up to $149 a share. Heady times indeed they were, but those heady times spurred a level of hubris among RIM executives - including its once humble founder Mike Lazaridis - that entirely sank the company. Once Lazaridis and his cohort and co-CEO Jim Balsillie were moved out, Thorsten Heins took over and faced a simply monumental task in trying to recover RIM's old life.

We will say this - hubris has an enormous price tag. Balsillie and Lazaridis, at their peak, owned 26 million and 30 million shares respectively. These shares were once worth $3.7 billion and $4.3 billion respectively, respectively. Four years later, at $7 a share, Jim Balsillie's net worth had dropped to $182 million and Lazaridis' net worth had dropped $210 million. We don't know what percentage Lazaridis may still have in hand but Balsillie dumped all his shares once he was removed from office.

In any case, following on the recent announcement that 4,000 employees are being cut, BlackBerry announced today that it has signed a letter of intent (LOI) to be acquired by a consortium of buyers that will be led by Fairfax Financial Holdings Limited. We've already noted Fairfax's relatively long involvement with BlackBerry through Prem Watsa, who recently resigned from BlackBerry's board in order to pursue exactly the option that looks to now be inevitable. Fairfax owns approximately 10 percent of BlackBerry's common shares (worth almost $800 million) and would of course contribute its shares of BlackBerry it holds to the buyout.


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The LOI outlines a scenario under which BlackBerry shareholders would receive U.S. $9 in cash for each share of BlackBerry share they hold. This values the entire transaction at roughly $4.7 billion. The BlackBerry Board of Directors has made the recommendation to move forward based on the findings and recommendation of a special committee of board members assigned to review all possibilities for moving BlackBerry forward that was formed about six weeks ago.

For those who care about such details, 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 to the BlackBerry board. 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.

Various folks involved in the likely transaction meanwhile have weighed in with the usual statements. Barbara Stymiest, chair of BlackBerry's Board of Directors, noted, "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 CEO and chairman (and former BlackBerry board member) Prem Watsa stated, "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."

A deal breakup fee is outlined in the LOI as well. If BlackBerry finds an alternative solution it will need to pay Fairfax a fee of $0.30 per BlackBerry share. However no such will be payable if the consortium reduces the price offered to less than the original $9.00 per share without the approval of the board of directors of BlackBerry.

In the end the sale comes as no surprise to anyone. There is still plenty that BlackBerry can do to survive as a small mobile vendor. There are niches for it to play in that will find core audiences within both government and enterprise markets where security is - either by design and intent or by federal or other requirements - a necessary component of doing business. Look for BlackBerry to primarily evolve into a full-fledged services company that will work within the realm of mobile devices not of its own making.

We'll revisit in more detail the options ahead for BlackBerry but today we can more simply state that the era of CrackBerry is finally and truly over.