“We believe this transaction will open an exciting new private chapter for BlackBerry its customers, carriers and employees,” Fairfax head Prem Watsa said in a statement.
“We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company,” the insurance company’s SEO added.
The Canadian financial holdings giant has agreed to pay $9 per share for the world famous mobile company — a premium of about 9%. Shares of BlackBerry were trading at $8.23 per share before the deal was initiated.
The deal claims that in case another buyer offers more than $9 a share during the set period, the Toronto-based conglomerate would receive an incentive fee of about $157 million for attracting interest in the company.
As news agancies claim, more details are expected to be revealed on November 4, when the “diligence period” ends.
The letter of intent allows the mobile company to keep searching for other potential investors before a final deal is complete with the Fairfax consortium.
“This is probably the best possible outcome of several unattractive options for BlackBerry,” said analyst Jack Gold, of J. Gold Associates. He went on, adding that the deal could give the company time to restructure and keep investors from “breathing down their neck.”
The deal would also “provide them with some financial stability so its enterprise customers would not feel compelled to replace them for fear of going out of business,” he added.
Enterprise customers are important to BlackBerry and its executieves announced a few days ago that thr company would focus future efforts on customers rather than consumers.
“But it won’t be easy. Negative press on its situation can sometimes be a self-fulfilling prophesy, and the market may not be kind to them even if they do provide innovative products and services,” he said.
By the way, the Canadian company still trying to raise the financing for the deal from BofA Merrill Lynch and BMO Capital Markets and is not obligated to follow through on an actual definitive agreement, CNBC News reports.
“At least they have one bid on the table. It would be an excellent thing for Blackberry to be able to go private, out of the public eye and to try and reshape itself and see if they can go forward market as an enterprise focused company,” said Colin Gillis, an analyst at BGC Partners, on CNBC’s Squawk on the Street, on Monday.
“The deal is hardly definitive at this stage,” said Eric Kirzner, a professor of finance at the University of Toronto.
“There are so many questions about it. It looks clever and it looks like it may set off a flurry of activity, maybe some other white knights are going to come along,” Kirzner said.
“Maybe that’s the intent of this, or maybe the intent is for Mr. Watsa to acquire the company but I just don’t know.”