BLACKBERRY yesterday dramatically abandoned a plan to sell itself to its biggest shareholder and instead unveiled a $1 billion (£627 million) financing deal in a bid to revive its fortunes.
Shares in the under-pressure Canadian technology group fell by as much as 13 per cent in early trading as the proposed deal with Fairfax Financial Holdings was announced.
Fairfax, which had been struggling to raise finance for a $4.7bn bid, has agreed to provide $250m of funding which will be convertible into shares as part of the deal which includes a number of other institutional investors.
Chief executive Thorsten Heins will step down and John Chen has been installed as interim chief executive while the company looks for a new leader.
Chen is the former chief executive of software firm Sybase who joined private equity group Silver Lake, which had been touted as a possible buyer of BlackBerry, as a senior adviser last year.
Fairfax had previously announced a tentative offer for the firm but last week it was revealed that the shareholder was struggling to finance the $9-a-share offer.
Barbara Stymiest, chairwoman of the board, said: “This financing provides an immediate cash injection on terms favourable to BlackBerry, enhancing our substantial cash position.”
BGC Partners analyst Colin Gillis, warned that, although the additional cash would buy BlackBerry more time: “The drumbeat of negativity is likely to continue”.
Moody’s had warned in September that the proposed bid by Fairfax would hurt the shareholder’s credit profile because it would result in the conversion of a public equity investment into a private structure.
The structuring of the current deal gives Fairfax and the other investors flexibility as the financing is in the form of convertible debentures. If all the debentures are converted, the new stock would expand BlackBerry’s outstanding share base by almost 20 per cent.
In September, the firm reported a quarterly loss of nearly $1bn, underlining the woes which lie behind the bid from its largest shareholder to take it out of the public eye.
The loss included a write-down of about $934m for unsold Z10 phones, a touchscreen model that the company had hoped would reverse its fading fortunes. The phone has seen poor sales among business and consumer customers alike.
The tech giant, which had warned of poor results earlier this month, said its net loss for the second quarter was $965m, or $1.84 a share. Revenue fell 45 per cent to $1.6bn from a year earlier.
The company plans to shed about 4,500 jobs, or more than a third of its workforce, as it shrinks to focus on corporate and government customers.
BlackBerry has recently decided not to market its devices to consumers, instead focusing on the professional users that brought its first success and won the little devices the nickname “Crackberry” for their addictive nature.
BlackBerry, formerly known as RIM, was once Canada’s most valuable company, with a market value of $83bn in June 2008. At their peak in autumn 2009, BlackBerry’s smartphones enjoyed global market share of more than 20 per cent which has since evaporated to some 1.5 per cent.