Prem Watsa launches $US4.7 billion takeover bid for BlackBerry

A consortium led by Canadian investment guru Prem Watsa has launched a $US4.7 billion takeover bid for embattled smartphone maker BlackBerry.

In a statement, Blackberry has announced it has signed a $US4.7 billion letter of intent with the consortium, which includes Watsa’s Fairfax Financial Group, in a bid financed by BofA Merrill Lynch and BMO Capital Markets.

The consortium is offering $US9 per share, a small premium on the company’s closing price of $US8.80 per share, and gets six weeks to conduct due diligence on the company, which will be completed on November 4.

“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world,” Wasta said in a statement.

The deal comes days after the company issued a disastrous preliminary update to its second fiscal quarter results, showing the company was headed to a massive loss of between $US950 million to $US995 million for the quarter.

Making matters worse, the company only managed to sell 3.7 million devices, the majority of which ran the company’s older Blackberry 7 platform, meaning less than 1.85 million of the company’s newer Blackberry 10 devices were sold during the quarter.

Even worse still, most of the write own was attributable to unsold inventory of the Blackberry Z10 smartphone, once hailed as the company’s saviour, with the company reporting a “pre-tax charge against inventory and supply commitments in the second quarter of approximately $930 million to $960 million, which is primarily attributable to BlackBerry Z10 devices”.

DigiTimes is reporting Taiwanese component suppliers for BlackBerry, including Wistron, Silitech Technology and Ichia Technologies are bracing themselves for order cuts as the Canadian smartphone maker reduces its product line to just four devices.

With the announcement, the company confirmed that it is slashing its workforce by 40%, or 4500 positions.

The Canadian smartphone maker was placed on the market on August 13^th, following Watsa’s resignation from the board of directors.

Watsa is currently the company’s largest shareholder, owning 10% of the company, with the takeover news coming a day after reports surfaced of a potential rival bid led by co-founder Mike Lazaridis.