MW Transaction Analysis
BlackBerry Agrees to Tentative Go-Private Deal with Consortium Led by its Largest Shareholder
- Total Transaction Size: $4.7 billion
- Implied Enterprise Value: $4.7 billion
- Implied EV/LTM Revenue: 0.2x
- Implied EV/LTM EBITDA: 1.4x
- BlackBerry (NASDAQ: BBRY) announced today that it has entered into a letter of intent (LOI) with a consortium of investors led by Fairfax Financial (FFH: CN) to purchase BlackBerry for $9 a share - a 3.1% premium over its closing price on Friday. The per-share price implies an enterprise value of $4.7 billion.
- BlackBerry's stock closed today at $8.82 per share, up 1.1%. This compares with a close of $10.42 per share a month ago (August 26th) and $10.55 per share a week ago (September 17th). With a per share offer less than recent market value, this transaction fits the definition of a take-under.
- Fairfax' stock closed today at $420.45 per share, also up 1.1%. Fairfax is already BlackBerry's largest shareholder with just under a 10% stake in the company. Other investors in the deal were not disclosed.
- The LOI calls for Fairfax and its investor partners to obtain financing and complete diligence by November 4, 2013. BlackBerry has until that date to seek better offers. If BlackBerry decides not to proceed or finds another buyer, it will owe Fairfax a fee of 30 cents a share or $157 million - suggesting that another buyer is unlikely to compete.
- Fairfax Chairman and CEO Prem Watsa - who has been referred to as the Warren Buffett of Canada - was a member of the board of directors of BlackBerry until August 12th, when the company announced that it was forming a special committee to explore strategic alternatives. Watsa resigned from the board because of the potential conflict of interest.
- Primarily an insurance holding company, Fairfax also serves as an investment platform for Watsa. Based on its history of acquisitions, the firm has no prior experience with turnarounds.
Can BlackBerry be saved?
- At martinwolf, we have followed BlackBerry's fall closely. In a recent article titled "What Company Would Buy BlackBerry?" in Yahoo! Finance, Marty Wolf wrote that BlackBerry is "a tragic story of a company on top of the world that either badly misjudged its market or utterly failed to capitalize on the incredible opportunities available to it."
- Opinions in the marketplace about BlackBerry's outlook, even with this acquisition, are mixed. The company has been steadily declining since Apple launched its iPhone in 2007, and has yet to produce a device capable of competing with either iPhone or Android.
- Last week, Blackberry announced a $1 billion loss for the previous quarter, that it is cutting another 4,500 jobs and taking a $960 million write down for unsold inventory of its latest smartphone. BlackBerry also acknowledged it is giving up on consumers and focusing on its roots, the enterprise customer.
- Optimists view this deal as similar to the $24.9 billion go-private deal for Dell: away from Wall Street's quarterly scrutiny, BlackBerry might be able to re-structure, downsize and re-focus its business for profitability.
- Pessimists note that the market has changed since BlackBerry was the dominant player, and that its decision to focus on the enterprise will fail. BYOD, a strategy that lets employees bring their own devices to work, is gaining traction in enterprises and consumers are overwhelmingly choosing iPhones and Androids.
- No matter which side of the fence you're on, the process of trying to save BlackBerry has been like trying to catch a falling knife.
For more information, see the press release.
martinwolf was not the advisor in this transaction.
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With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in six countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies.
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