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The Deal: Fairfax Drops $4.7B BlackBerry Bid

NEW YORK (The Deal) -- BlackBerry (BBRY - Get Report) is hitting reboot once again, with the troubled phone maker Monday, Nov. 4, abandoning plans to sell itself and sacking its CEO after major shareholder Fairfax Financial Holdings walked away from a proposed $4.7 billion buyout.

Waterloo, Ont.-based BlackBerry said Fairfax instead would invest $250 million in a $1 billion convertible debentures sale. Fairfax in September had agreed to a tentative deal to buy the company but had until end of business Monday to secure financing for the purchase and make a definitive offer.

BlackBerry said it has concluded a review of strategic alternatives first announced in August, and would instead go it alone with a new management team.

Upon closing of the bond sale, CEO Thorsten Heins will step down and one-time Sybase CEO John Chen will be named executive chairman of the board. Fairfax CEO Prem Watsa, who stepped down from the board last summer ahead of his firm's bid for BlackBerry, will rejoin the group and serve as lead director.

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Chen will also serve as interim CEO. The convertible bond sale is priced at $10 per common share, a premium of 28.7% to BlackBerry's Nov. 1 close, and if fully converted would represent about 16% of the company's common shares.

The reshuffling continues a long downward spiral at BlackBerry, a one-time high flier which has lost more than 80% of its value since the beginning of 2011 as its smartphones have been outmuscled by offerings from Appleand products running Google's Android operating system.

Shares of BlackBerry opened down more than 16% Monday morning.

But BlackBerry chairwoman Barbara Stymiest in a statement called the Monday announcement "a significant vote of confidence" in the company.

"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," Stymiest said. "This financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position."

JPMorgan Securities, Perella Weinberg Partners and RBC Capital Markets are serving as financial advisers to BlackBerry, with Skadden, Arps, Slate, Meagher & Flom, Torys and Blake, Cassels & Graydon providing legal advice.

Fairfax was advised by BDT & Co., Bank of America Merrill Lynch and BMO Capital Markets , Shearman & Sterling and McCarthy Tetrault, with BMO also acting as the sole bookrunner for the private placement.

Written by Lou Whiteman.

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