The share price of BlackBerry fell sharply after the smartphone manufacturer said that it is abandoning plans to find a buyer and its chief executive officer (CEO) is stepping down.
The company announced that it had made its decision after a two month review of strategic options and negotiations with potential buyers that included Facebook, Lenovo and private equity firms such as Cerberus. Instead, it now plans to raise US$1bn via an issue of convertible notes to a group of long-term investors including its largest shareholder, Fairfax Financial Holdings.
Fairfax had made the only formal offer to buy BlackBerry and even that was tentative, hoping to take the company private for US$4.7bn. However, reports suggest that Fairfax chairman and CEO Prem Watsa had problems in securing financing for the deal. Fairfax will now have around US$250m of BlackBerry’s debt offering.
BlackBerry’s CEO, Thorsten Heins, will step down from his role in around two weeks’ time once the debt offering is completed. He will be replaced on an interim basis by John Chen, who will also serve as the executive chair of the BlackBerry’s board. Chen is credited with turning around the fortunes of enterprise software company Sybase in the late Nineties, prior to its acquisition in 2010. Last year he joined private equity firm Silver Lake as senior adviser.
“BlackBerry is an iconic brand with enormous potential – but it’s going to take time, discipline and tough decisions to reclaim our success,” Chen said in the statement. “I look forward to leading BlackBerry in its turnaround and business model transformation for the benefit of all of its constituencies, including its customers, shareholders and employees.”
Fairfax’s Watsa commented: “Fairfax is a longtime supporter, investor and partner to BlackBerry and, with this investment, reinforces its deep commitment to the future success of this company.”
Restoring the company’s fortunes will prove challenging though. BlackBerry reported a second quarter loss of US$965m, while Microsoft’s Windows Phone operating system has surpassed BlackBerry for third in market share, behind Apple iOS and Google Android.
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