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BlackBerry Ltd is following Dell Inc in pursuing a leveraged buyout after losing its market leadership to rivals such as Apple Inc. That's where the comparisons between the two companies end.
BlackBerry's deteriorating business prospects and a lack of financing make its tentative $4.7-billion buyout agreement a harder sell to investors. The bid, announced on Monday by top shareholder Fairfax Financial Holdings Ltd, comes with caveats: The rest of the coalition of buyers hasn't been identified yet, and financing still needs to be lined up.
Like BlackBerry, Dell used to dominate an industry - in its case, personal computers - and sought refuge from the public markets after losing its technological edge. Dell's buyout, however, had the backing of the company's billionaire founder and Silver Lake Management LLC. At BlackBerry, meanwhile, Fairfax isn't committing money to the bid beyond its stake, and prospective buyers ranging from KKR & Co to Microsoft Corp are unlikely to join the effort.
"If they have a real name committed in the consortium, they would have flagged the name," said Erik Gordon, a professor at the University of Michigan's Ross School of Business. "If they had a strong consortium, not only wouldn't they keep their names secret, they would put 10,000 spotlights on it and say, 'Look who's on it.'"
Shares recover
BlackBerry shares rose 1.1 per cent to $8.82 on Monday after the deal was announced, erasing an intraday decline of as much as 6.1 per cent. The Fairfax offer represents a 3.1 per cent premium over BlackBerry's closing price last week. The stock remains down 26 per cent this year and has fallen about 94 per cent since its peak in 2008.
For the next six weeks, a Fairfax-led group will scrutinise the device maker's books while BlackBerry CEO Thorsten Heins and a special board committee see if there are any alternative proposals.
"This transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees," Fairfax CEO Prem Watsa said in a statement on Monday.
"We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world."
Job cuts
The Waterloo, Ontario-based phone maker was already retooling its strategy before the buyout was announced. BlackBerry said last week that it's cutting 4,500 jobs and narrowing its focus to corporate and professional customers.
It also is taking a writedown of as much as $960 million for unsold inventory of its Z10 phone - a touch-screen device unveiled in January as its answer to the iPhone.
