TORONTO -- BlackBerry Ltd. has reached a tentative agreement for a $4.7 billion buyout by a group led by its biggest shareholder, forging a path to go private after years of losing ground to Apple's iPhone and Google's Android.
The group led by Fairfax Financial Holdings Ltd. would offer $9 a share a cash, according to a statement Monday -- a 3.1 percent premium over BlackBerry's closing price last week. The consortium is still seeking financing for the offer, which will be subject to due diligence and further negotiation.
BlackBerry, the one-time smartphone leader, was forced to seek buyout offers this year after a new operating system failed to fuel a comeback. For the next six weeks, a Fairfax-led group will scrutinize the device maker's books while BlackBerry Chief Executive Officer 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 the statement. "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."
The Waterloo, Ontario-based company said last week that it's cutting 4,500 jobs and 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. BlackBerry said it expects to report its weakest quarterly
sales in six years.
Watsa has held talks with BlackBerry co-founder Mike Lazaridis on working together on a deal, according to people with knowledge of the matter, who asked not to be identified because the discussions are private.
Lazaridis didn't immediately return an email message seeking comment. Attempts to speak with Watsa weren't immediately successful.
Watsa stepped down from BlackBerry's board last month to avoid a conflict of interest as the company sought a buyer. Fairfax had a 9.9 percent stake in BlackBerry as of June 30, according to data compiled by Bloomberg. Lazaridis, who stepped down as co-CEO last year, still holds about 5.7 percent of the company.
The Fairfax coalition, which hasn't been identified, is in flux and new investors could join while financing is lined up, said a person familiar with the matter.
BlackBerry rose 1.1 percent to $8.82 at the close in New York. The shares climbed as high as $9.20 before sinking back below the offer price.
"The uncertainty around the subject of financing means it won't lift the stock above $9 for any length of time," said Matt Skipp, chief investment officer with Sw8 Asset Management Inc., a hedge fund based in Toronto. "The market always likes cash bids, but the market likes cash bids that aren't subject to financing." Skipp manages C$55 million ($54 million) and has shorted shares of BlackBerry in the past.
Fairfax climbed 1.1 percent to C$420.45 in Toronto.
BlackBerry, credited with inventing the first smartphones more than a decade ago, once sold products that were so popular and addictive they were known as CrackBerrys. In recent years, the company failed to keep pace with Apple Inc. and Samsung Electronics Co., which offered better Web browsing and a wider range of applications. BlackBerry's share of the global smartphone market shrank to 2.9 percent in the second quarter from 4.9 percent a year earlier, according to IDC. It has fallen to fourth place behind Google Inc.'s Android, Apple's iOS and Microsoft Corp.'s Windows Phone platform.
"Yesterday's heroes are tomorrow's losers," said David Cockfield, fund manager with Northland Wealth Management in Toronto. His firm manages about C$225 million, including a small amount of BlackBerry shares. "I hope Prem Watsa knows what he's doing."
The group led by Toronto-based Fairfax is seeking financing from Bank of America Corp.'s Merrill Lynch unit and from BMO Capital Markets, according to the statement. BlackBerry didn't name the other members of the takeover consortium.
BlackBerry will owe a breakup fee of 30 cents a share, or about $157 million, if it chooses an alternate transaction, the company said. If the smartphone maker and Fairfax sign a definitive agreement, the fee will rise to 50 cents a share.
JPMorgan Chase and Perella Weinberg are advising a special committee of BlackBerry's board on the transaction. Skadden Arps Slate Meagher & Flom and Torys are legal advisers to the committee.
BDT & Co., Merrill Lynch and BMO are Fairfax's financial advisers, while Shearman & Sterling and McCarthy Tetrault are its legal advisers.
"It's the best the company can get to survive," Neeraj Monga, an analyst with Veritas Investment Research Corp. in Toronto, said of the tentative bid. "At least under a private owner they can shrink to a size where they may become profitable and a sustainable business."
-- With assistance from Ari Altstedter in Toronto.