Update: Investment group offers $4.7 billion for BlackBerry

Canada's Fairfax Financial Holdings heads group looking to buy flagging smartphone maker

A consortium led by Canada's Fairfax Financial Holdings has offered to acquire struggling smartphone maker BlackBerry for $4.7 billion.

The proposed dealis supported by BlackBerry's board of directors.

Fairfax already owns about 10% of BlackBerry stock and would acquire the remainder for $9 per share and take the company private under the terms of a letter of intent. BlackBerry stock was trading at around $8.25 when the deal was announced.

The consortium has to complete due diligence before the deal can close. Due diligence is expected to be completed by Nov. 4. Until then the deal could still fall apart or have the terms of the acquisition changed.

The letter of intent allows BlackBerry to keep talking with other potential investors before a final deal is signed with the Fairfax consortium.

"This is probably the best possible outcome of several unattractive options for BlackBerry," said analyst Jack Gold, of J. Gold Associates, in an email. He said the deal could give the company time to restructure and keep investors from "breathing down their neck."

The deal would also "provide them with some financial stability so its enterprise customers would not feel compelled to replace them for fear of going out of business," he said. Enterprise customers are important to BlackBerry and the company said last week it would focus future efforts on them rather than consumers.

"But it won't be easy. Negative press on its situation can sometimes be a self-fulfilling prophesy, and the market may not be kind to them even if they do provide innovative products and services," he said.

BlackBerry was once the leader of the smartphone sector. At a time when other companies were asking consumers to struggle with clunky Web interfaces to email, BlackBerry revolutionized messaging with its handsets that combined an email client with a real keyboard.

But the company failed to evolve its handset range when Apple launched its iPhone and full-screen touchphones began attracting consumers. Its BlackBerry 10 operating system, released earlier this year after more than a year of delays, was an attempt to turn things around but many analysts saw it as coming too late.

Consumers too, apparently, have felt the same way. On Friday, BlackBerry said it would take almost $1 billion in charges on unsold Z10 handsets. The Z10 was the launch flagship of the new BlackBerry 10 operating system.

BlackBerry has also dropped behind Microsoft's Windows Phone to become number four in the smartphone market, according to the latest estimate from IDC. Google's Android accounts for around 80 percent of the market, Apple's iOS comes in second with 13 percent and then it's Windows Phone at 4 percent and BlackBerry at 3 percent.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

Copyright © 2013 IDG Communications, Inc.

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