Shares of Blackberry (BBRY, BB) were halted again today after
Fairfax Financial (FFH) signed a letter of intent (LOI) to acquire
the company for $9 in cash/share, which would imply a value of $4.7
Specifically, the letter of intent stipulates that Blackberry
would be taken private through financing from Bank of America
Merrill Lynch and BMO Capital Markets with diligence expected to be
completed by November 4, 2013.
Recall on 8/12, Prem Watsa, Chairman and CEO of Fairfax
Financial (and also BlackBerry's largest shareholder), stepped down
from the Board of Directors owing to a potential conflict of
This sparked speculation of a possible buy out by Watsa given
his 10% ownership in the company. As far as investors could
ascertain at that point in time, Watsa had reached out to pension
plans in Canada, but there had been no bids to date.
According to the release, "the Special Committee is seeking the
best available outcome for the Company's constituents...and an
opportunity to determine if there are alternatives superior to the
At $9 in cash per share, this valuation seems a bit lofty. From
an investor perspective, it is doubtful there will be other
alternatives on the table. $4.7 billion likely includes the
company's cash ($2.6 billion) and patents ($2.1 billion), but it is
unclear how or if a write-down is being baked into receivables and
inventory. Additionally, where account liabilities ($3.4 billion in
accounts payable and accrued expenses) fits into the overall
equation is questionable.
In the mean time, Watsa is Blackberry's own white knight given
his long term investment horizon and clout (known as the "Warren
Buffet" of Canada). Fairfax Financial serves as both an investment
vehicle for Watsa as well as an insurance holding company.
Separately, Apple (
) continues to tick up after the company announced better than
expected unit sales. The company also guided to the high end of its
previous revenue guidance ($34 billion - $37 billion) and gross
margins (36-37%) for the fiscal 4th quarter.
BBRY 8.80 USD +0.07 +0.80
BB 9.04 CAD -0.04 -0.44
AAPL 490.99 +23.58 +5.04
FFH 419.67 CAD +3.81 +0.92