Canada's own version of Warren Buffett may be coming to save BlackBerry.
BlackBerry entered into an agreement to sell itself to Fairfax Financial Holdings — considered in some circles to be the "Berkshire Hathaway of Canada" — today for $4.7 billion. It's a far cry from the company's peak, when its stock was worth hundreds of dollars instead of the roughly $9 today.
Still, it marks a curious investment for the company, which is largely invested in financial companies, according to data from S&P CapitalIQ. Fairfax Financial Holdings already held a 10% stake in BlackBerry prior to the arrangement unveiled today, in which it would buy BlackBerry for $9 a share.
In the statement today, Prem Watsa, the CEO of Fairfax, said "this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world."
Fairfax Financial Holdings is run by Watsa, dubbed the "Warren Buffet of Canada" in some circles.
Watsa is an Indian-born chemical engineer who, according to an earlier report in The Guardian, moved to Canada with about $8 to his name. He then made his mark with an investment in Bank of Ireland, which ended up with a huge return. His most recent bet was on a return to prominence for Greece, one of the most economically troubled companies in Europe.
Watsa and Fairfax Capital were suspected to be orchestrating the sale of BlackBerry after he resigned from the board in August.
According to a report in The Guardian, he had been on the board of BlackBerry for only seven months before he departed in early August. His reasoning was for "potential conflicts" — which makes sense given the news today.
Fairfax's initial investment came in July last year, when the stock was worth about $7.
At the time, a Fairfax spokesperson told Reuters that the firm strongly believed that "Thorsten Heins is singularly focused on the success of RIM and its BB10, and we firmly support him and the entire BlackBerry team working tirelessly to bring this exciting new platform to market."
However, Thorsten Heins' big bet — the BB10 operating system and the Z10 smartphone running it — ended up costing BlackBerry around $1 billion.
Even still, a majority of the company's activity is in the insurance space.
From the company's bio:
Fairfax Financial Holdings Limited is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management. Fairfax's corporate objective is to achieve a high rate of return on invested capital and build long-term shareholder value. Fairfax seeks to differentiate itself by combining disciplined underwriting with the investment of its assets on a total return basis, which Fairfax believes provides above-average returns over the long-term.
Fairfax's "Guiding Principles" include never betting the company on any project or acquisition.
In 2012, the company posted roughly $532.4 in net income and $22.94 in earnings per share, up from a loss of 31 cents per share in 2011 on net income of $45.1 million.
Here's how the company's stock has favored in the past two years:
In all, it marks a curious investment for Fairfax and Watsa, but not unsurprising given the strange bets he and his firm have made in spots like Greece and Ireland.
Matthew Lynley is a business reporter for BuzzFeed News in San Francisco. Lynley reports on Silicon Valley and the tech industry.
Contact Matthew Lynley at email@example.com.
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