Taking a page from Dell, Blackberry has signed a letter of intent with Fairfax Financial for a $4.7 billion buyout. The deal would pay each shareholder $9/share in cash, and could end up bringing Blackberry under the auspice of privatization.
Under the terms of the agreement, Fairfax has six weeks for due diligence and negotiations. In that six weeks, Blackberry is allowed to “go-shop”, which means they can continue to field and solicit offers from other companies. Should they find an offer attractive enough to make them forgo their offer with Fairfax, a termination fee of $0.30/share applies — about $156 million. That termination fee is subject to the $9/share offer price holding steady: should the board of directors allow any offer to be altered to reflect a lower price, the termination fee rises to $0.50/share.
That’s a stopgap Fairfax has implemented to protect themselves from an undercut offer from another company. Fairfax currently owns 10% of Blackberry through holdings, and Fairfax CEO Prem Watsa noted “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 stock surged half a point on news of the buyout offer, and has since relaxed to $8.85/share at the time of publication. Fairfax is currently seeking financial backing from Bank of America, Merrill Lynch, and BMO Capital Markets to complete the deal. As stated in the announcement, “There can be no assurance that due diligence will be satisfactory, that financing will be obtained, that a definitive agreement will be entered into or that the transaction will be consummated.”
A step forward for Blackberry, but far from a done deal.