Sorry, BlackBerry (NYSE:BB) investors -- it looks like I was wrong.
And no, not about my recent assertion we really can't count on BlackBerry to continue operating over the long-term, despite its widely publicized insistence otherwise.
Instead, I was wrong in speculating Fairfax Financial (OTC:FRFHF)(TSX:FFH) CEO Prem Watsa would be able to follow through on his September offer to acquire BlackBerry for $4.7 billion, or $9 per share.
Here's what BlackBerry said
Per the terms of the original tentative bid, Watsa had given himself six weeks through today to present a final offer. That should have been plenty of time, in his words, to complete due diligence "to figure out what's needed to finance it over the long term, and then [raise] the money to have a capital structure that will help the company over the long term."
This morning, however, BlackBerry issued a press release stating it has concluded its previously announced "review of strategic alternatives," in favor of accepting private investments totaling $1 billion. Curiously enough, $250 million of that total will come from Fairfax Financial -- which is already BlackBerry's single largest shareholder -- with the remainder stemming from an unnamed group of other institutional investors.
What's more, BlackBerry also stated Thorsten Heins will step down from BlackBerry's board and from his post as CEO. For now, former Sybase chief John Chen will be appointed executive chair of BlackBerry's board and serve as BlackBerry's interim CEO while the company searches for Heins' permanent replacement.
Finally, and perhaps most telling, Prem Watsa himself will be appointed lead director and chair of BlackBerry's compensation, nomination, and governance committee.
Here's what really happened
In the release, BlackBerry board chair Barbara Stymiest stated: "The BlackBerry Board conducted a thorough review of strategic alternatives and pursued the course of action that it concluded is in the best interests of BlackBerry and its constituents, including its shareholders."
Sure, and I suppose their decision had absolutely nothing to do with the fact Reuters reported Friday Fairfax Financial was having trouble securing financing for its $4.7 billion bid. Specifically, though Watsa and Fairfax were said to be working with Merrill Lynch and Bank of Montreal's BMO Capital to put together a leading syndicate for the deal, Reuters stated they had "already been turned down by several large lenders."
For the record, that flies in the face of Watsa's defense of his bid in September, saying "We've got a track record of 28 years of completing what we've done." Simultaneously he insisted he and Fairfaix thought "long and hard before [offering] $9 a share," and had no intention of changing his figure.
To be fair, Watsa's continued involvement proves he hasn't changed his mind, and Fairfax still has plenty to lose if BlackBerry fails -- but that still doesn't mean he's right in diving deeper today.
As it stands, despite strength in BlackBerry's enterprise business and early signs of life from its BBM platform, it's still hemorrhaging money and facing a massive exodus of engineering talent. You can't blame those aforementioned large lenders for denying Watsa the funds he sought.
Until BlackBerry can show more tangible proof it has what it takes to return to sustained long-term profitability, the struggling smartphone maker will remain a risk I'm simply unwilling to take.