BlackBerry shares fall 16% on withdrawal of sale plan
05 November 2013
Shares of BlackBerry dropped 16 per cent in trading yesterday after the company confirmed it would abandon plans for a sale as it struggled to gain momentum in a tough smartphone market.
The company announced in a statement that it would receive a $1-billion investment from Fairfax Financial Holdings, the company that originally struck a deal to acquire the Canadian smartphone maker (See: Blackberry receives $4.7-bn buyout offer from Prem Watsa's Fairfax Financial).
Blackberry's decision comes after a two-month review of strategic options and talks with potential buyers including Facebook, Lenovo and private equity firms such as Cerberus Capital Management LP.
BlackBerry said it will abandon a sale. Instead, it would raise $1 billion with a convertible notes issue to a group of long-term investors including its largest shareholder, Fairfax Financial Holdings.
The only formal offer for buying the company, a tentative one, came from Fairfax, that intended to take the company private for $4.7 billion
However, Reuters citing sources said Fairfax boss Prem Watsa had trouble financing the deal. Fairfax would now end up with $250 million of the debt offering.
BlackBerry CEO Thorsten Heins would step down from his role, with John Chen taking over on an interim bases. Chen would also serve as the executive chairman of BlackBerry's board.
"BlackBerry is an iconic brand with enormous potential - but it's going to take time, discipline and tough decisions to reclaim our success," Chen said in the statement. "I look forward to leading BlackBerry in its turnaround and business model transformation for the benefit of all of its constituencies, including its customers, shareholders and employees."
Prior to joining BlackBerry, Chen served as chairman and CEO of Sybase, an enterprise and mobile software company, which was acquired by SAP in 2010.
USA Today quoted Gartner analyst Carolina Milanesi, as saying that putting a non-device person as an interim CEO was a clear sign that the devices business was not what mattered anymore.
According to John Stephenson, a senior vice president at First Asset Investment Management and one of BlackBerry's disgruntled investors, the company was haemorrhaging employees, it was hemorrhaging customers and the only thing that was growing was doubt.
BlackBerry founders Mike Lazaridis and Douglas Fregin, partnering with Cerberus and mobile chip giant Qualcomm, were considering a bid for BlackBerry and had sent a letter to the company expressing their interest and asking for more time to finalise a bid, (See: BlackBerry founders mull takeover).