BlackBerry To Go Private? One Possible Suitor

Reuters is out with a story this morning that indicates BlackBerry’s (TSX:BB,NASDAQ:BBRY) CEO and the company’s board are “increasingly coming around to the idea that taking BlackBerry private would give them breathing room to fix its problems out of the public eye”.

This is not a huge surprise to us and we’ve mentioned this as a potential outcome for the company in the past.  The company has no need for the public equity market as it is still generating significant cash flow, carries a sizeable cash balance, has no debt and can essentially finance itself.

Seemingly, all the equity market represents is one big distraction.  BlackBerry has embarked on a strategy that involves new products and a new direction for its business.  This is going to take time to play out.  And to let it play out in the relative calm of the private market makes perfect sense to this Fool.

Here’s the surprise

Reuters didn’t mention a likely suitor and indicated that it may be hard to find a buyer and the funding to go private.  I respectfully disagree.

In my mind, the most likely suitor is already intimately familiar with BlackBerry as he sits on the company’s board and already owns 10% of the company.  I’m of course talking about Prem Watsa, Chairman and CEO of Fairfax Financial (TSX:FFH).

In Fairfax’s recent quarterly release, the company indicated that it has $1.2 billion in available cash at the holding company level.  BlackBerry’s enterprise value is just under $2 billion.  That’s not a big gap, even if all of Fairfax’s cash isn’t used to consummate a transaction.  Debt could easily cover the difference, especially given Fairfax’s financial strength, and BlackBerry’s ability to generate cash.

And perhaps Watsa doesn’t go it alone.  However, given that he’s on the board, he’s going to have some say in a potential suitor anyway.  And, given that his cost basis is estimated to be around $17 and that he feels that BlackBerry will someday be worth $40, he certainly isn’t going to approve of a deal that would see his 10% stake sold at a level that looks anything like where the stock currently sits.

Foolish takeaway

There is a deal to be made here.  At what price is anybody’s guess.  The combination of BlackBerry’s ability to generate cash and its already cash heavy balance sheet, along with the fact that its biggest shareholder sits on the board and has money to burn makes for pretty nice package to pontificate on.  The “made in Canada” angle here is just an added bonus.  From a strategic standpoint, going private could be the best thing that could happen to BlackBerry and would be a refreshing change from how other Canadian tech giants have exited the scene in the past (cough, Nortel).

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Fool contributor Iain Butler does not own shares in any of the companies mentioned at this time.  The Motley Fool does not own shares in any of the companies mentioned at this time.