As of this week, Fairfax Financial Holdings, a Canadian insurance company, has agreed to acquire BlackBerry in a $4.7 billion buyout deal. The company will be paying $9 a share to the failing mobile brand. Should any other offer come through at over $9 a share, Fairfax will receive an incentive fee of approximately $157 million for having drawn more interest to BlackBerry. Prior to the freezing of trading last week, the shares were selling at $8.23 per share.
News of the buyout followed BlackBerry’s announcement last Friday of a major restructuring project. The company plans to cut 4,500 jobs, nearly 35% of its workforce, during this restructuring. Additionally, the company said that they’re anticipating a second-quarter loss of around $1 billion.
While these announcements seem fatal for the company, Brian Colello, an analyst for Morningstar, believes that, “The benefit to this sort of takeover is the ability for BlackBerry and the consortium to reinvent the company without public scrutiny. So we won’t see any of these warnings or earnings releases that do nothing but disappoint investors. The company can go ahead with its strategy, as it pleases, that’s a positive.”
Though the acquisition of BlackBerry seems to give the company a glimmer of hope, it is, in reality, a temporary solution to an ongoing problem. While Fairfax Financial may be able to cushion BlackBerry’s fall, the fall is still inevitable. Fairfax is also capable of backing out of the deal at any time and does not have an actual definitive agreement with the mobile company. As of right now, however, it looks as if this buyout is BlackBerry’s best option, even with the anticipated bleak outcome.
Image Source: THE CANADIAN PRESS/Geoff Robins
