BlackBerry Limited, a struggling maker of smartphones, on Monday said it had signed a letter of intent agreement (LOI) under which a consortium to be led by Fairfax Financial Holdings Limited (“Fairfax”) has offered to acquire the company subject to due diligence.
The letter of intent contemplates a transaction in which BlackBerry shareholders would receive $9 in cash for each share of BlackBerry share they hold, in a transaction valued at approximately $4.7 billion. The consortium would acquire for cash all of the outstanding shares of BlackBerry not held by Fairfax. Fairfax, which owns approximately 10% of BlackBerry’s common shares, intends to contribute the shares of BlackBerry it currently holds into the transaction.
The BlackBerry board of directors, acting on the recommendation of a special committee of the board of directors, approved the terms of the LOI under which the consortium, which is seeking financing from BofA Merrill Lynch and BMO Capital Markets, would acquire BlackBerry and take the company private subject to a number of conditions, including due diligence, negotiation and execution of a definitive agreement and customary regulatory approvals.
The special committee, chaired by director Tim Dattels, was formed in August 2013 to review strategic alternatives for the company. J.P. Morgan and Perella Weinberg are acting as financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP and Torys LLP are acting as legal advisors.
Diligence is expected to be complete by November 4, 2013. The parties’ intention is to negotiate and execute a definitive transaction agreement by such date. During such period, BlackBerry is permitted to actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals.
If during the diligence period BlackBerry enters into any letter of intent or definitive agreement providing for an alternative transaction, BlackBerry ceases to negotiate with the consortium in good faith with a view to entering into the definitive agreement by the end of the diligence period, or an alternative transaction is publicly proposed or publicly announced and is consummated within 6 months following the end of the diligence period, or during the 3 month period following the end of the diligence period, BlackBerry enters into any agreement providing for an alternative transaction with a person with whom discussions were held before or during the diligence period, then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share, provided, however, that no such fee shall be payable if the consortium shall have reduced the price offered below U.S. $9.00 per share without the approval of the board of directors of BlackBerry. In the event that a definitive agreement is signed with Fairfax the termination fee will increase to U.S. $ 0.50 per share.