BlackBerry Ltd (BBRY) Might Go Extinct If Watsa Bid Fails

BlackBerry Ltd (BBRY) Might Go Extinct If Watsa Bid Fails
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Prem Watsa’s Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) is planning on taking BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) private at $9 per share according to a deal announced yesterday. A new report from National Bank Financial suggests that the company’s shareholders should be very happy. BlackBerry was going extinct without the move.

BlackBerry Ltd (BBRY) Might Go Extinct If Watsa Bid Fails

According to Kris Thompson, who authored the NBF report, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) “is likely headed towards extinction following its current roadmap.” He suggested that shareholders should be “very happy” that their money has been saved, even if shares have lost more than 25 percent of their value since January 1.

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BlackBerry privatization

Prem Watsa has not confirmed an acquisition of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) just yet. The Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) deal is reliant on due diligence and the confirmation of loans to complete the deal, as well as regulatory approval. If any of those factors go wrong, the BlackBerry acquisition will not go through, and shareholders will be left holding shares in a dying company.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is dying, and it seems almost impossible to resurrect. Prem Watsa has been a vocal and powerful member of the board for the last year, and he hasn’t managed to come close to turning the firm around. The Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH)’s effort to turn the company around will be a difficult manoeuvre .

According to Thompson, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) needs “fresh management and bold ideas in order to capture the enterprise sliver of the global smartphone market.” Even that may not be enough as the entire smartphone business gets more competitive and Microsoft Corporation (NASDAQ:MSFT) aims firmly at enterprise.

BlackBerry sum of parts

The $9 per share purchase of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) may seem like a security blanket to some analysts, but Goldman Sachs Group Inc (NYSE:GS) analyst Simona Jankowski isn’t as positive on the deal. The investment bank uses a sum of parts method that puts the value of the smartphone maker at $10 per share.

That implies that Prem Watsa is getting a great deal on the BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) acquisition. According to Goldman, the company has around $2.6 billion in cash and investments. That means the real value of the firm’s brand, patents and other business is only around $2.1 billion under the terms of the Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) deal.

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