Waterloo, Ont.-based BlackBerry Ltd. will wave goodbye to its CEO Thorsten Heins and sell $1 billion of convertible debentures instead of selling the company to FairFax Financial as proposed in a previous deal announced Aug. 12, The Globe and Mail reports.
FairFax had been in talks with BlackBerry to buy the firm for $4.7 billion and possibly take it private. But today the firm announced it was finished its examination of BlackBerry’s books and there would be no acquisition. FairFax will invest $250 million in the company at a price of $10 per share. FairFax will have an option to invest another $250 million within 30 days of the deal closing, and other investors will be sought to round out the total $1 billion in funding.
Thorsten Heins will leave the company and be replaced by John Chen, who has been appointed executive chairman of the board, and will be interim CEO. The former Sybase Inc. CEO is known for turning around the enterprise software firm by focusing on mobility solutions in the early 2000s. That led to a sale of the firm to SAP AG for $5.8 billion.
“Today’s announcement represents a significant vote of confidence in BlackBerry and its future by this group of preeminent, long-term investors,” said Barbara Stymiest, Chair of BlackBerry’s Board in a statement. “The BlackBerry Board conducted a thorough review of strategic alternatives and pursued the course of action that it concluded is in the best interests of BlackBerry and its constituents, including its shareholders. This financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position. Some of the most important customers in the world rely on BlackBerry and we are implementing the changes necessary to strengthen the company and ensure we remain a strong and innovative partner for their needs.”
BlackBerry’s stock dropped about 12 to 15 per cent following the news the FairFax deal is off. Its stock price on the NASDAQ is currently sitting at about $6.88 per share.
FairFax CEO Prem Watsa will now rejoin the BlackBerry board. He’d excused himself from the board to avoid any conflict of interest while FairFax considered a takeover.
“Fairfax is a long-time supporter, investor and partner to BlackBerry and, with this investment, reinforces its deep commitment to the future success of this company,” said Prem Watsa, Chairman and CEO of Fairfax said in the BlackBerry press release. “I look forward to rejoining the BlackBerry Board and to working with the other directors and management team, under John Chen’s leadership, to shape the next stage of BlackBerry’s strategy and growth.”
The transaction must be approved by the Toronto Stock Exchange in order to close.