BlackBerry Buyout Hopes Go from Possible to Hopeless

Telecom & Wireless

Published: November 4, 2013 8:55 am

Last Updated: November 4, 2013 9:50 am

Sale hopes for BlackBerry Ltd. (NASDAQ: BBRY) may have just died and been sent to purgatory. BlackBerry has announced that it has received a $1 billion investment from Fairfax Financial and other institutional investors. In short, no buyout. The company has concluded its strategic review.

Where this gets real interesting is that BlackBerry’s Thorsten Heins is being sent packing. John S. Chen is being appointed executive chair of BlackBerry’s board of directors and being given the title Interim CEO. Prem Watsa, who is chairman and CEO of Fairfax, is being appointed as lead director.

The Fairfax and institutional investors are investing $1 billion in a private placement of convertible debt. Fairfax is acquiring $250 million of the total principal amount, and the deal is expected to close within two weeks. The new deal is a 6% unsecured subordinated convertible note, which converts into BlackBerry common stock at a price of U.S. $10.00 per common share. The debentures have a term of seven years.

BlackBerry said, “Based on the number of common shares currently outstanding, if all of the U.S. $1 billion of Debentures were converted, the common shares issued upon conversion would represent approximately 16% of the common shares outstanding after giving effect to the conversion.”

Thorsten Heins and David Kerr intend to resign from the board at closing. Sorry, but that is called being fired.

BlackBerry’s death is one that will now continue as a public company. Its future is no more certain that it was when Fairfax first signaled the deal. Hopes for a merger just died.

UPDATE 9:48 a.m. EST: BlackBerry shares were originally down over 20% after the trading halt was lifted. Now the stock is down by “only” 11.6% at $6.87. We have seen more than 32 million shares trade hands in the first 20 minutes of trading plus the pre-market trading. The average daily volume is closer to 26 million shares.

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