How Low Will Prem Watsa’s BlackBerry Offer Go?
If Prem Watsa and Fairfax Financial do move ahead with their deal to take BlackBerry private, how much will they end up paying for the increasingly infirm smartphone pioneer? Significantly less than they originally offered, says the developing consensus among the Greek chorus of critics charting BlackBerry’s descent into the maelstrom.
Under the terms of the deal Fairfax proposed last month, the anonymous consortium it’s heading up will pay $9 per share for all outstanding shares of BlackBerry not already held by Fairfax, which currently owns a 10 percent stake in the company. The financial holding company also gave itself six weeks to conduct due diligence, offering BlackBerry the same amount of time to shop itself to other parties. But, since the company has been searching for a buyer without success for months, it seems unlikely that one will emerge now; it’s hard to imagine BlackBerry in its current state inciting a bidding war.
“We doubt a strategic investor will show interest, given the pace of decline in BlackBerry’s business,” Nomura analyst Stuart Jeffrey said Monday. “With BlackBerry’s change in strategy now very public, we believe that operators, distributors, consumers, and enterprise customers and partners will quickly drop their support for BlackBerry and look at alternatives.”
And that, along with Fairfax’s due diligence, may give the firm cause to revise its price before making an official offer for Blackberry later this year. Mike Walkley at Canaccord Genuity thinks BlackBerry’s likely fate is a sale to Fairfax Financial and its partners for $7 a share. Jefferies analyst Peter Misek sees a similar final price. “The bid could be lowered to (approximately) $7 as a last resort,” Misek said. “We think other bidders will be unlikely.”
Others wonder if that price will go lower still. “I would think Fairfax would want a lower bid if they’re the only one at the table looking to buy it,” Ironfire Capital founder Eric Jackson told AllThingsD. “After seeing their earnings, I think a price between $5 and $7 is more likely than $9.”
Perhaps. At the $7.95 price they closed at on Monday, BlackBerry shares are more than a dollar below Fairfax’s bid already. And given the skepticism surrounding BlackBerry and its fast-eroding business, it’s hard to imagine that they’ll recover.