BlackBerry investor looks to set up consortium for rescue
By Paul Taylor in New York
The backing of Canadian banks and pension funds would be central to a BlackBerry rescue plan led by Prem Watsa’s Fairfax Financial, the Canadian smartphone maker’s biggest shareholder, according to analysts.
Mr Watsa, a long-term value investor who has been described as Canada’s Warren Buffett, stepped down from BlackBerry’s board on Monday as the company set up a special committee to consider options including joint ventures, partnerships or an outright sale.
Mr Watsa cited potential conflicts of interest for his decision, but emphasised he had no intention of selling his BlackBerry shares. Mr Watsa did not return calls seeking comment.
"We think Prem Watsa’s resignation from the board supports a possible LBO [leveraged buyout] scenario," said Peter Misek at Jefferies. "We believe Fairfax along with other Canadian pension funds and banks are considering taking BlackBerry private."
Speculation about a possible ‘Canadian rescue’ for the Ontario-based company which became the country’s flagship technology group after Nortel Networks filed for bankruptcy in January 2009, has been fuelled in recent weeks by comments made by several Canadian pension fund chiefs.
Mark Wiseman, chief executive of Canada Pension Plan Investment Board, who runs the country’s second-largest pension fund management firm, told Bloomberg last Friday that he would consider an investment in BlackBerry if the company decided to go private. Several other pension fund leaders have made similar comments.
Mr Watsa did not return calls seeking comment. Canada Pension Plan Investment Board declined to elaborate on Mr Wiseman’s comments.
BlackBerry shares closed up 1.39 per cent to $10.93 in New York. The shares rose 10.5 per cent on Monday.
Mr Misek calculates that BlackBerry could support a buyout price of around $15 a share, or just under $8bn, though other analysts believe BlackBerry would still need fundamental changes to its business model.
"The best possible long-term outcome for BlackBerry is to cease hardware production for the consumer market and to adapt all its applications to work on iOS and Android, and so become an almost pure service/application provider of corporate cloud applications," said Stuart Jeffrey of Nomura. "We believe that this would be a difficult and painful transition and one that might be best suited to a company that is private rather than publicly listed."
BlackBerry, which has lost $78bn of its market value in the past five years, was counting on the launch earlier this year of a range of new smartphones based on its new operating system called BlackBerry 10.
However, consumers and corporate buyers have given the new devices a lukewarm reception and BlackBerry’s core subscriber base has continued to decline.
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