BlackBerry To Go Private After $4.7 Billion Acquisition Deal (UPDATED)

UPDATE, 11/5: The buyout deal between BlackBerry and Fairfax Financial Holdings has fallen through. Read the story here.

A consortium led by Fairfax Financial Holdings Limited has reached a preliminary agreement to purchase device maker BlackBerry for $4.7 billion, the two companies announced Monday.

Fairfax said it plans to take BlackBerry private by cashing out shareholders at $9 per share.

"The consortium would acquire for cash all of the outstanding shares of BlackBerry not held by Fairfax," BlackBerry said in a released statement. "Fairfax, which owns approximately 10 percent of BlackBerry's common shares, intends to contribute the shares of BlackBerry it currently holds into the transaction."

The announcement comes on the heels of BlackBerry's Q2 2014 financial report, which indicated a net operating loss between $950 million to $995 million for the period and almost $1 billion in unsold hardware. Along with the net loss, BlackBerry also announced that 4,500 employees would be cut in the coming months.

Once a dominant player in the smartphone market, BlackBerry has seen its market share shrink to 2.7 percent. Analyst group IDC forecasted earlier this month that BlackBerry's market share would decline to 1.7 percent by 2017.

The move to go private would allow the company to try to reorganize without its stock prices fluctuating during the transaction. However, many analysts, including Jan Dawson, chief telecoms analyst at Ovum, believes the move won't save the company.

"Normally, companies are taken private in order to give a long-term strategy time to payoff without the hassles of short-term investor scrutiny," Dawson said in an e-mailed statement. "But BlackBerry's key problem for the last couple of years has been the lack of such a long-term strategy. It simply hasn't articulated a way to rebuild its business as its device sales drop precipitously. Unless Fairfax plans to radically change or accelerate BlackBerry's strategy, it's unlikely to be able to turn the company around."

Dawson said that without a drastic transformation, BlackBerry may be entirely out of the hardware device business by mid-2014.

Before the deal can be finalized, Fairfax needs to secure the funds for the buyout. The two companies are agreeing to complete due diligence by Nov. 4. In the meantime, BlackBerry is free to negotiate with any other potential buyers.

BlackBerry's share prices fell 17 percent on Friday after the company's financial report was released. However, Monday's news saw those shares rise by 1.09 percent at the end of trading.

About the Author

Chris Paoli (@ChrisPaoli5) is the associate editor for Converge360.