BlackBerry agrees to be bought by Fairfax

Smartphone maker BlackBerry announced today that is has agreed in principle to be purchased by Canadian insurance company Fairfax Financial in a deal worth close to $5 billion.

There were eyebrows raised back in August when Prem Watsa, head of Fairfax Financial, announced that he was stepping down from the board of BlackBerry. Through Fairfax, Watsa owned around 10% of BlackBerry, and his reason for stepping down was given as being a conflict of interest at time when the company had said it was exploring its options.

Today it was confirmed that Fairfax has offered a cash deal of $9 per share to acquire BlackBerry. The news comes after Friday's announcement of a huge exercise in cost-cutting by BlackBerry, with 4.500 jobs (around 40% of its workforce) to be lost in an attempt to combat mounting losses.

The company once dominated the smartphone market, but now has been left far behind by phones running the Android and iOS operating systems; BlackBerry said last week that it expects to make quarterly losses approaching $1 billion.

A statement issued by the Canadian smartphone-manufacturer today said that it ‘signed a letter of intent agreement under which a consortium to be led by Fairfax Financial Holdings Limited has offered to acquire the company subject to due diligence.’

That process is expected to run until the beginning of November, with a conclusive deal expected to be agreed by 4 November. Today’s announcement does not mean that any exclusivity has been struck between Fairfax and BlackBerry as the phone maker seeks a buyer, with the latter saying it will carry on talking to other potential buyers.

Shares in BlackBerry were temporarily suspended as the announcement was made. After resuming trading, the price moved higher before paring its gains. By mid-afternoon in New York, the US listing of the shares were trading at $8.76, up 0.57%.

BBM, BlackBerry’s instant messaging service, was due to be released as an App for Android and iOS devices over the weekend, although the rollout was suspended.

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