BlackBerry to be acquired by a group led by Fairfax Financial
BlackBerry agreed in principle Monday to be acquired by Fairfax Financial, a Canadian insurance company, for $9 a share in a deal worth $4.7 billion in US dollars.
Fairfax Financial, sometimes called the Berkshire Hathaway of Canada, is a holding company whose primary business is in insurance. It is also BlackBerry's largest shareholder, owning about 10 percent of the company's common shares.
BlackBerry now enters a shop period for about six weeks where it can solicit, receive and enter into negotiations with other interested parties. If another buyer offers more than $9 a share during the shop period, then Fairfax would receive an incentive fee of about $157 million for attracting interest in the company. More details are expected on November 4, when the "diligence period" ends.
It should also be noted that Fairfax is 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.
"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.
Trading in BlackBerry was halted before the announcement. When it resumed at 2 p.m. EDT, the stock jumped as much as 5 percent before retreating slightly. Prior to the announcement shares in the troubled smartphone maker company were down more than 5 percent.
News of BlackBerry's buyout offer comes just after the company announced on Friday a massive restructuring, which includes slashing 4,500 jobs, and a revised forecast for its second-quarter earnings.
(Read more: BlackBerry to slash 4,500 jobs in restructuring )
The company said it expects a second-quarter loss excluding items of 47 cents to 51 cents per share, which is more than the 27-cent loss per share in the same quarter last year. It also expects revenue to decline to $2.6 billion from $3.1 billion a year ago.
Analysts had expected the company to report a loss excluding items of 15 cents a share on $3.06 billion in revenue, according to a consensus estimate from Thomson Reuters.
(Read more: BlackBerry bought private jet months before layoffs )
"Based on the company's disastrous earnings warning on Friday, I think a deal had to happen and the sooner the better. This is probably the only out for investors and the most likely outcome," said Brian Colello, an analyst for Morningstar. "The benefit to this sort of takeover is the ability for BlackBerry and the consortium to reinvent the company without public scrutiny. So we won't see any of these warnings or earnings releases that do nothing but disappoint investors. The company can go ahead with its strategy, as it pleases, that's a positive."
Prem Watsa, Chairman and CEO of Fairfax, said in a statement on Monday that a "private chapter" for BlackBerry would deliver immediate shareholder value while enabling the company to continue with its "long-term strategy."
But just because the company may get the funds to continue with its business strategy in private, doesn't mean its strategy will work, said Roger Kay, president and founder of Endpoint Technologies Associates, on CNBC's Squawk on the Street on Monday.
"I see this as a temporary transfusion. This is a financial company giving them a lifeline so they can last until the next moment," Kay said. "I don't think this changes the story on the ground at all. Blackberry is a deflating balloon. It's just been running out of air as fast as it can."
(Read more: BlackBerry buyer an old hand at value investing)
Watsa, a chemical engineer by training who has run the firm since the mid-1980s, is leading the buyout offer. The press-shy Watsa has long been a supporter of BlackBerry, and his name has been linked with a potential buyout for months.
(Read more: BlackBerry bought private jet months before layoffs)
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—Reuters contributed to this report.