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BlackBerry is going private in a $4.7B deal

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Trading in shares of Waterloo, Ont.-based smartphone maker BlackBerry was halted again Monday for major news: BlackBerry has agreed to be acquired by a consortium led by Fairfax Financial Holdings in a $4.7 billion deal that would take the company private.

BlackBerry has signed a letter of intent with a consortium led by Fairfax that would see BlackBerry shareholders receive $9 in cash for each BlackBerry share they hold. That’s a small premium over the $8.48 price shares were trading at on the TSX when trading was halted to announce the deal. It’s well off the 52 week high for BlackBerry of $18.49, but also well above the 52 week low of $6.10. Fairfax already holds 10 per cent of BlackBerry’s shares.

The deal, which has been approved by BlackBerry’s board of directors, is subject to due diligence, negotiation, execution of a definitive agreement, and regulatory approval, as well, of course, as approval by a majority of BlackBerry shareholders. Fairfax expects to complete its diligence by Nov. 4.

“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees,” said Fairfax president and CEO Prem Watsa, in a 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.”

As only a letter of intent has been signed, and not a definitive agreement, there is the possibility for other competing offers for BlackBerry to come forward during the “go-shop” period, possibly at a premium over the FairFax offer. For example, during Dell’s recent go-private move, competing offers forced founder Michael Dell and his consortium to raise their initial offer before the deal was finally done.

“The Special Committee is seeking the best available outcome for the company’s constituents, including for shareholders,” said Barbara Stymiest, chair of BlackBerry’s board of directors, in a statement. “Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium.”

Much of Fairfax’s acquisition activity has been in the insurance and reinsurance space, but it does have technology expertise on its board of directors, including Rogers Telecommunications president and CEO Alan Horn and former Mitel president and CEO Anthony Griffiths.

It was the second halt-trade for BlackBerry in as many business days. On Friday, trading was halted for the company to preview a loss of as much as $985 million when it releases its second quarter results next Friday, due to a write-down on unsold inventory of as much as $960 million. It also announced a layoff of 4,500 employees (40 per cent of its staff), and a plan to cut its product lineup from six devices to four as part of a shift away from the consumer space to focus on the enterprise and prosumer market.