Skip to main content
Access every election story that matters
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Access every election story that matters
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
// //

Fairfax Financial’s Prem Watsa speaks during the company's annual meeting in Toronto, April 11, 2013. If there is a champion for Canada’s hopeless causes, then Prem Watsa is its undisputed titleholder. The chairman and CEO of Fairfax Financial Holdings Ltd. has a fondness for unloved stocks that few investors can stomach.

AARON HARRIS/Reuters

If there is a champion for Canada's hopeless causes, then Prem Watsa is its undisputed titleholder. The chairman and CEO of Fairfax Financial Holdings Ltd. has a fondness for unloved stocks that few investors can stomach.

Mr. Watsa likes to rummage through the junk of the Toronto stock exchange's garage sale, and his search for hidden jewels has sometimes led to scrappy investments.

He bet big on CanWest Global Communications and then some more before the media company went bankrupt. He gambled on AbitibiBowater before the newsprint producer sought protection from its creditors and restructured its debt.

Story continues below advertisement

But Fairfax's shareholders are patient with Mr. Watsa because of his many smart moves.

The India-born investor made a killing during the financial crisis – a cool $2-billion. He rightly saw that the fancy mortgage and consumer debt packages crafted by Wall Street securitization wizards were ticking bombs.

So is he right this time around? And is he really serious with BlackBerry? Or is Mr. Watsa just looking for a way to salvage his earlier investments at little extra cost? One has to wonder, because news of a potential consortium of acquirers answers fewer questions than it raises.

Fairfax's investments in BlackBerry appeared on the radar screen in the winter of 2012. At the time, the Waterloo, Ont., company was still promising to reinvent the smartphone with its new operating system, and that promise held some value. Now we all know how that turned out. Canada's former tech champion is imploding in front of our eyes, discounting its unsold Z10 touch screen phones and laying off 4,500 employees or a whopping 40 per cent of its staff.

Nonetheless, Mr. Watsa claims Blackberry has a fighting chance of surviving by going private and by turning its back on consumers that now prefer phones designed by Samsung and Apple. "We believe this transaction will open an exciting new private chapter for BlackBerry," he said in a statement, as the company will now "focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world."

But skepticism abounds as BlackBerry retreats in a corporate and professional market that has profoundly changed since it was the bread and butter for Research In Motion, the company's former name.

The only piece of good news in Friday's profit warning was that the service BlackBerry sells to its corporate customers to manage employee smartphones is increasingly popular. But one reason for that success is that the service can now manage phones other than Blackberrys. And that trend is quite worrisome. As more and more companies encourage employees to bring their mobile phones from home, whatever sway BlackBerry still holds over IT managers fades away.

Story continues below advertisement

Does Mr. Watsa believe that BlackBerry can beat this trend? Going by the saying "putting your money where your mouth is," the Fairfax CEO doesn't appear to be a die-hard believer. In fact, Fairfax's commitment to BlackBerry looks timid.

Fairfax's plan for BlackBerry is a "letter of intent agreement," rather than a formal offer. And the company's statement that a takeover offer of $9 (U.S.) a share would be made by "a consortium to be led by Fairfax" appears to suggest that the consortium has yet to be cemented.

It's unknown who Fairfax's partners are, and if they or Fairfax plan to put any of their own money in BlackBerry to conclude this transaction with its estimated $4.7-billion price tag. While the company's prospects are in miserable shape, Blackberry has no debt, is sitting on $2.6-billion in cash reserves and holds valuable patents. It would not be a financial stretch, for potential acquirers, to buy Blackberry by leveraging up its existing assets, albeit at financial conditions that are presumably onerous.

Moreover, if BlackBerry walks away from the deal, it must pay Fairfax a break-up fee, but if Fairfax leaves the table, Blackberry receives no compensation whatsoever.

It is hard to believe that BlackBerry's board would have gone public with a shaky proposition if there was no real substance behind it. But then again, BlackBerry is a desperate company. And this is no iron-clad cellphone contract you can't tear up without losing your shirt: there are enough "ifs" and "buts" and "due diligence conditions" in this letter of intent to return your Blackberry no questions asked.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies