BlackBerry will not be sold to Fairfax Financial Holdings or any other buyers. The company announced today that instead, it will remove itself from the public markets, and sell U.S. $1 billion in convertible debt to Fairfax and other institutional investors, with $250 million going to Fairfax.
The transaction will close in two weeks, pending approval from the Toronto Stock Exchange.
After the deal closes, BlackBerry CEO Thorsten Heins will hand over the reigns to former Sybase chief John S. Chen. Chen will lead BlackBerry until the company decides on a new CEO. BlackBerry’s David Kerr will also resign, and Fairfax CEO Prem Watsa will take over Kerr’s role as lead director of compensation, nomination and governance at BlackBerry. Watsa has lead Fairfax for nearly three decades–since 1985.
John Chen is a respected leader in enterprise software, having led Sybase for 12 years until that company was acquired by SAP in 2010. He is currently a director of both Wells Fargo and The Walt Disney Company.
“BlackBerry is an iconic brand with enormous potential,” Chen said in an official statement. “But it’s going to take time, discipline and tough decisions to reclaim our success.”
In September, Fairfax announced its intention to buy BlackBerry for $4.7 billion in a deal that was set to close today. Although the company hasn’t said why that deal folded, it’s likely that Fairfax couldn’t raise enough money.
After Fairfax’s announcement, BlackBerry reportedly attracted interest from other potential buyers, including Cisco, Lenovo, and Qualcomm. Even BlackBerry’s founders, who left the company when Heins took over, said they were looking at buying back the company.
BlackBerry said that the transaction marks the end of its “review of strategic alternatives,” which the company set up in August after it announced poor quarterly smartphone sales, a $1 billion write-off, and layoffs for 4,500 workers.
Under the transaction’s official terms, Fairfax and the other investors will purchase $1 billion for 6% BlackBerry’s unsecured subordinated debentures, which will be convertible into common shares of BlackBerry at a price of U.S. $10 per common share, a 28.7% premium over the November 1 closing price of BlackBerry common shares. The investors also have an option to purchase up to an additional U.S. $250 million in debentures within 30 days following closing. The debentures have a term of seven years.
BlackBerry board of directors chair Barbara Stymiest thanked Heins for trying to steady the battered company over the past six years. “Under his leadership, BlackBerry established a more efficient cost structure, developed new products, saw the adoption of BES 10 and delivered the BlackBerry 10 platform,” she said. “These are all significant accomplishments.”
