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More Details Emerge on Fairfax Financial Deal & Prem Watsa’s Plans

who what where when why

Every few hours we seem to learn a bit more about what went into the Fairfax Financial consortium $1 billion convertible debt deal. The latest is from the Globe & Mail bringing us some great quotes and insight into Prem Watsa’s plans. Here are some of the highlights:

  • “Our focus is great management, we have to get the best management,” he added. “Once we saw John Chen we had to work to make sure we could attract him.”
  • Mr. Chen’s pay package is designed to ensure that he is thinking as a long-term shareholder
  • Chen at BlackBerry Town Hall introduction: “‘I’m here, I’m going to listen to you. Whatever we do, we have to make money. There are lots of assets here, we’ll figure it out together … I’ve got some ideas already, but I’m not going to go with preconceived notions.’”
  • “When there’s fear it’s difficult to raise money,” Mr. Watsa says. “The marketplace is driven by greed and fear. Greed you can see in Twitter and fear you can see in BlackBerry.”
  • …advisors that Fairfax had hired, PMP Consulting, spent three weeks poring over BlackBerry’s books and concluded that a leveraged buyout would add too much debt to the firm. Until that point, Fairfax had planned to structure a going-private transaction valuing the company at almost $5-billion – $2-billion in debt and $3-billion in equity.
  • The final weekend of discussions was intense. Mr. Watsa says BlackBerry would not have survived if it were not for director Tim Dattels, the chair of the special committee, who negotiated through the final days.

What I found the most interesting is that Prem Watsa suggested that he will not be any more involved in BlackBerry’s day to day operations than the other directors. Specifically he said that:

“My role as an independent director is to make sure that we support John Chen and make sure the company can go forward and react to things very quickly,” he says. “It’s a changing world, changing business, and my role is very simply to support him. I’ll help him on anything that comes up – financing, strategic things that come up – but there’s only one decision-maker in my mind, and it’s John Chen.”

This is going to be an interesting ride!

3 total comments on this postSubmit your comment!
  1. Yes indeed a very interesting ride.

  2. I think things may be heading in the right direction. My confidence grows.


    • I don’t know John any more than the next average investor but I too have certain confidence in what he has to bring to the table. John seems to understand that BlackBerry is the underdog in their market and is in the position of weakness and must have appropriate strategy to overcome this. Thor, on the other hand, appeared to rely heavily on BlackBerry’s past accomplishments and reputation and thought those traits alone was enough to sell the new handsets. I also think that Boulben adds minimum value and is dead weight. The marketing efforts are stale and uninspiring.

      I hope John is a student of history and is well aware of what happened when Sony, the company with the superior technology of Betamax, went head to head with a consortium of companies backing the VHS standard and lost big time. They also need to understand that if nothing else changes it will be Android that will win the smartphone market and not Apple and they need to come up with a strategy to overcome this.

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