BlackBerry’s creators are looking to buy back their baby, throwing their corporate hat into the ring alongside Fairfax Financial in a bid to save the beleaguered smartphone maker.
BlackBerry founders Mike Lazaridis and Douglas Fregin filed paperwork with financial regulators paving the way for a takeover bid for troubled Waterloo, Ont. company.
According to sources, Lazaridis and Fregin would have no connection to the $4.7-billion takeover offer from Fairfax Financial Holdings Ltd. that was tentatively agreed to by the company’s board of directors in September.
Documents filed with the U.S. Securities Exchange Commission state that Lazaridis and Fregin have “the goal of stabilizing and ultimately reinventing the company based on a plan developed by them.”
This latest development sets the stage for a bidding war between the company’s two largest shareholders. Lazaridis and Fregin, although having cut ties with the company, control about 8 per cent of BlackBerry, less than the 10 per cent stake held by Fairfax.
Rumours have surfaced that Fairfax Financial Holdings is not the only shark in the water circling BlackBerry, as that company continues to bleed red and shed employees. (continued.)
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According to reports from various media outlets, some of the interested parties include tech giants Google, Microsoft, Cisco and SAP.
Meanwhile, BlackBerry announced it is laying off about 300 head office employees this week, as part of its overall cost-cutting plan to reduce the work force by about 40 per cent – with the eventual aim of eliminating 4,500 jobs in the coming months.
“We are in a period of transition and we must focus on enhancing our financial results to be in a better position to compete in this current mobile environment,” said BlackBerry spokeswoman Rebecca Freiburger, in a prepared statement. “We recognize our local employees’ hard work on behalf of our company and the difficulty of this news.”
Last month, BlackBerry received a conditional takeover offer from Fairfax Financial Holdings Ltd., BlackBerry’s largest shareholder, worth $9 (US) a share, placing a value on the company of $4.7-billion.
According to those privy to the ongoing discussions, Fairfax’s chief Prem Watsa has been personally contacting several leading Canadian and U.S. pension and private equity funds to win support for the proposed acquisition – support estimated to be in the $1 billion range. (continued.)
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The potential acquisition is being pitched as a leveraged buyout that would be financed with more than $3-billion of bank loans, $1-billion of equity from institutions and Fairfax’s stake in BlackBerry. That stake is currently valued at about $470-million
Fairfax has been quietly courting BlackBerry for months, but according to sources, the company’s directors had little interest in the highly leveraged plan until the announcement of a nearly $1-billion writedown erased nearly 20 per cent of the company’s stock market value in the final hour of trading.
Fears of further stock declines prompted the board to enter discussions with Fairfax, which after months of talks with a variety of potential buyers, was the only buyer still expressing interest in the company. Sources privy to the final-hour negotiations said talks almost broke off when Fairfax refused to back away from its demand for the lucrative $150-million break fee it eventually secured.
What is unusual about BlackBerry’s commitment to pay a break fee is that Fairfax has submitted an offer that is so tentative, it represents little more than an expression of interest.
Under the terms of Fairfax’s proposal, it can walk away from its acquisition plan if it becomes dissatisfied after assessing the company’s confidential financial and operating data. (continued.)
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Once the job cuts are complete, BlackBerry will have cut more than 7,000 employees since 2011 – a far cry from the company’s heyday when staff totals neared 20,000.
BlackBerry has announced that it expects to face costs of at least $400-million before the end of May of next year. The expenses are tied to the severance payments for the layoffs, as well as reworking its smartphone lineup and other changes to its manufacturing, sales and marketing operations.
