BlackBerry has announced a new strategy for moving ahead. It's walking away from Fairfax Financial Holdings' $4.7 billion offer to buy the company, it announced Nov. 4, and instead is accepting a $1 billion investment from Fairfax, its largest stakeholder, as well as other investors, in exchange for convertible notes.
Fairfax will acquire $250 million of the debentures (a debt based on creditworthiness, not collateral).
CEO Thorsten Heins will be leaving the company, and in the interim John S. Chen, the former head of Sybase, will serve as BlackBerry's CEO and chair of its board.
Heins will also step down from the BlackBerry board, as will David Kerr, who has been with the board since 2007.
Prem Watsa, CEO and chairman of Fairfax, will be appointed lead director and chair of the Compensation, Nomination and Governance Committee.
The transaction is expected to be completed "in the next two weeks," said BlackBerry.
"Today's announcement represents a significant vote of confidence in BlackBerry and its future by this group of preeminent, long-term investors," Barbara Stymiest, the current chair of BlackBerry's board, said in a statement.
"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 shareholders," Stymiest continued. "This financing provides an immediate cash injection on terms favorable to BlackBerry enhancing our substantial cash position."
BlackBerry shares were down by nearly 20 percent in the morning after BlackBerry's announcement, Seeking Alpha reported.
"BlackBerry is an iconic brand with enormous potential—but it's going to take time, discipline and tough decisions to reclaim our success," Chen said in a statement. "I look forward to leading BlackBerry in its turnaround and business model transformation for the benefit of all of its constituencies, including its customers, shareholders and employees."
BlackBerry Rearranges Its House
BlackBerry announced Aug. 12 that after a thorough review of its situation, it was open to "strategic alternatives," such as "possible joint ventures, strategic partnerships or alliances, a sale of the company or other possible transactions."
BlackBerry signed a letter of intent with Fairfax in September, which gave Fairfax until Nov. 4 to perform due diligence and the same amount of time for BlackBerry to consider alternatives.
Google, SAP, Samsung and Lenovo were all reported to be interested in parts of the company, and co-founder and former co-CEO Mike Lazaridis also looked into options for buying back the company.
BlackBerry executives reportedly also met with Facebook executives about a potential bid.
The details of Heins' departure from the company haven't yet been made clear.
According to a May proxy filing, Heins stood to gain $16.1 million if new leadership took over and he was let go, but potentially $48 million if he were fired by the new company, Bloomberg reported Aug. 16.
BlackBerry, once the smartphone market leader, struggled to compete with the Apple iPhone after its 2007 introduction, and soon was also overtaken by phones running Google's Android platform.
After several delays to the introduction of BlackBerry 10, positioned as a sort of silver bullet for the company, Heins was named CEO in January 2012, taking over for co-CEOs Lazaridis and Jim Balsillie. The move suggested a needed streamlining (Heins himself had been a co-COO) and a firm, new hand on a shorter rein.
Heins made no statement in the Nov. 4 announcement.