These are stories Report on Business is following Monday, Nov. 4, 2013.
Shares of BlackBerry Ltd. plunged today after the death of a tentative deal to sell the embattled smartphone maker to Canada’s Fairfax Financial Holdings Ltd.
The stock fell 11.6 per cent by midmorning on Nasdaq, to $6.87 (U.S.).
In a stunning development, as The Globe and Mail’s Boyd Erman reports, BlackBerry has scrapped plans for an auction, and will, rather, raise $1-billion in new funds by selling convertible notes to a group of investors that includes Fairfax.
At the same time, chief executive officer Thorsten Heins will leave, and John Chen, the former chief of Sybase Inc., will be appointed executive chair of the board, responsible for the company's "strategic direction, strategic relationships and organizational goals."
He will be interim CEO when Mr. Heins leaves.
Fairfax chief Prem Watsa becomes the "lead director."
There are still other options. BlackBerry could, for example, sell its patents, chief investment officer Jack Ablin of BMO Private Bank told Bloomberg News.
“Looks like doors are closing on BlackBerry and they are going to be looking at fewer options,” he said.
Fairfax had signed a letter of intent to lead a consortium that would take BlackBerry private for $4.7-billion, or $9 a share, and had until today to complete its due diligence.
As its shares sank, both the company and Mr. Watsa put a positive spin on the development.
"Today's announcement represents a significant vote of confidence in BlackBerry and its future by this group of preminent, long-term investors," said chair Barbara Stymiest.
"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 its shareholders," she added.
"This financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position."
Mr. Watsa, in turn, said Fairfax is a "long-time supporter, investor and partner" where BlackBerry's concerned.
It had not been alone in its interest. Also eyeing the company was a group that included BlackBerry co-founders Mike Lazaridis and Doug Fregin, U.S. private equity firm Cerberus Capital Management and chip maker Qualcomm Inc.
BlackBerry shares have traded below the $9 mark since Fairfax, which owns 10 per cent of the company, unveiled its original proposal. The markets had been skeptical all along that a deal would be done at that price, and the skepticism now proves well founded.
- Boyd Erman: BlackBerry-Fairfax deal dies, Thorsten Heins out
- Sean Silcoff: Who is John Chen, the man named to rescue BlackBerry?
- Complete coverage of BlackBerry
- Sean Silcoff: BlackBerry's future still uncertain as key deadline nears
- BlackBerry boasts of 'smashing success' with 20 million new BBM users
- Molly's back on BBM: Why BlackBerry's 'forbidden fruit' is such a hit
- Google's Android grabs 81% of smartphone market as BlackBerry, Apple slip
- Explainer: How does the wildly popular BBM differ from regular text messaging?
- Sean Silcoff, Jacquie McNish and Steve Ladurantaye: An exclusive report on the fall of BlackBerry
- Boyd Erman in Streetwise (for subscribers): BlackBerry's noisy auction: The unspoken truth
- How BlackBerry lost World War Z
Twitter boosts price
Twitter Inc. has raised the price of its hotly-awaited initial public offering.
In documents filed today with the Securities and Exchange commission, Twitter said it now projects a range of between $23 (U.S.) and $25 each in its planned offering of more than 70 million shares.
Underwriters can also buy an additional 10.5 million shares.
That price range is a hike from up to $20 earlier.
Twitter will begin trading under the symbol TWTR on the New York Stock Exchange on Thursday.
- Twitter boosts IPO range to $23 to $25.
- Omar El Akkad: Twitter’s IPO: Terrific growth, but is it worth $11-billion?
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Shares of Kellogg Co. climbed today after the food giant unveiled its third-quarter results and an overhaul that will slash 7 per cent of its global work force.
Kellogg said today its sales for the quarter dipped slightly to $3.72-billion (U.S.), while profit rose to $326-million or 90 cents a share from $318-million or 89 cents a year earlier.
The company also announced what it dubbed “Project K,” a “four-year efficiency and effectiveness program” that includes cutting jobs and is expected to save up to $475-million a year by 2018.
“We are making the difficult decisions necessary to address structural cost-saving opportunities which will enable us to increase investment in our core markets and in opportunities for future growth,” said chief executive officer John Bryant.
“These actions will set a foundation for our Sustainable Growth operating principle."
Pre-tax charges are expected to be between $1.2-billion and $1.4-billion.
Key this week
This week promises to be an interesting one in the markets, both on the corporate and the economic fronts.
Besides Twitter beginning to trade Thursday on the New York Stock Exchange, BCE Inc. and Telus Corp. report third-quarter results, which, as Rita Trichur writes, will shed more light on the battle for wireless subscribers.
Also reporting quarterly results this week are, as Jacqueline Nelson reports, Canada’s major life insurers, as well as the two big airlines, Air Canada and WestJet.
Worth watching, too, are Tesla Motors results tomorrow given the high-flying nature of its shares.
Where the economy’s concerned, we’ll get key readings from the United States on how the economy fared in the third quarter, and how the labour market performed in October. The former comes Thursday, the latter on Friday.
“The data out this week are likely to show the economy slowed in Q3, in part because of rising fiscal uncertainty, and got off to a slow start in Q4, largely because of the government shutdown and lingering concern about another political showdown in the New Year,” said senior economist Sal Guatieri of BMO Nesbitt Burns.
Statistics Canada will also be reporting on the Canadian jobs market, also on Friday.
“RBC Economics is looking for the pace of employment gains to clock in at 12,000 in October, virtually unchanged from September,” said economists at Royal Bank of Canada.
“In terms of the composition, goods-producing sectors (+7,000) are expected to fare slightly better than services (+5,000), and a 25,000 advance in the labour force is expected to help nudge the unemployment rate higher to 7 per cent,” they added.
“In addition, this report will warrant some scrutiny for any signs of spillover impact from U.S. fiscal deliberations, which may have weighed on hiring activity during the month.”
Then there’s the key European Central Bank meeting, along with that of the Bank of England, on Thursday.
“European Central Bank president Mario Draghi has been outrageously positive recently, regardless of what EU economic data has been thrown his way,” said market analyst Alastair McCaig of IG in London.
“With figures seeing a recent downturn, however, it is likely that it will take more than just his willpower to maintain momentum. Speculation has intensified that either a cut in interest rates or, more likely, a relaxation of regulations will be required to assist mainland Europe.”
- Omar El Akkad: Twitter’s IPO: Terrific growth, but is it worth $11-billion?
- Rita Trichur: Telus, Bell third-quarter results to provide litmus tests for industry
- Tavia Grant: Jobs report likely to show Canada’s labour market ‘on the mend’
Streetwise (for subscribers)
ROB Insight (for subscribers)
- HSBC latest bank dragged into forex probe as profit rises
- Euro zone factory activity points to broad-based economy recovery
- U.K. employers warn against EU exit, call for reforms