Prem Watsa, a successful value investor known as the Canadian Warren Buffett, may struggle to squeeze any more value out of his investment in floundering mobile company BlackBerry.
BlackBerry said Monday it is working on a deal to be acquired by a group of investors led by Fairfax Financial Holdings, the insurance business run by Watsa.
The deal, which is subject to due diligence, further negotiation and regulatory approval, would pay BlackBerry shareholders $9 a share in cash for a total value of about $4.7 billion, the company added.
BlackBerry shares closed up 1.1% at $8.82, noticeably below the $9 offer price, suggesting Wall Street thinks there's not much upside for the formerly highflying smartphone maker.
"Dismantling and selling the various assets -- I think that's the only thing they can do," said Gartner analyst Carolina Milanesi.
One hedge fund manager compared the proposed BlackBerry deal with Microsoft 's purchase of Nokia and Hewlett-Packard 's acquisition of Palm, describing them all as big mistakes. The manager did not want to be identified.
Gartner's Milanesi also compared BlackBerry with Microsoft and Nokia, saying these companies were once so dominant that they assumed they had time to adjust to new developments in the smartphone market.
"That's not true," she added. "BlackBerry was not moving fast enough" and took too long to release its new BB10 devices and operating system.
The result has been the loss of about 95% of BlackBerry's market value in recent years as the Canadian company fell behind Apple and Google's Android in the fast-growing smartphone market.
Watsa, who has an impressive track record as a value investor, plans to take BlackBerry private and refocus the company on services for companies and other enterprises. Watsa already owns about 10% of BlackBerry shares through the Fairfax insurance business he oversees. That stake will be contributed to the planned $4.7 billion deal.
"I would not rule them out," said Jeff Fenwick, who covers Fairfax as an analyst at Cormark Securities in Canada. "They are serious about this offer and would not go into this if they did not feel there was intrinsic value in the company still."
In a letter to Fairfax shareholders earlier this year, Watsa said he was excited about BlackBerry's prospects under the new leadership of CEO Thorsten Heins and the "technical genius" of founder Mike Lazaridis, who is a friend of Watsa's. (continued...)
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