After the huge operating loss and the consequent job-cutting of the second quarter, Blackberry received an offer to go private by Fairfax Financial Holdings Limited for $9 per share. Fairfax holds the 9.9% of Blackberry and is doing the due diligence; on November 4th the company will give more details. There are a lot of question points: 1. Fairfax is not agreeing to buy BlackBerry. It’s agreeing to consider buying BlackBerry. In addition, Fairfax doesn’t really have any lenders, though it’s “seeking financing from BofA Merrill Lynch and BMO Capital Markets.” . 2. The deal price is really low:
Source: Business Insider
It should be considered that Blackberry has got about $2.5bn in cash and another $2bn in patents, so the evaluation is quite rough.
Due to its current price at $7.95, there are interesting outcomes to be considered:
- The deal will be done without renegotiations, with a 13.2% potential margin.
- After the due diligence, Fairfax decides not to make the deal or to lower the price
- (less probably) Another offer may come with a better price.
The idea is to enter in a straddle buying 2 put and 1 call option, respectively at $7.50 (considering that the year-low is at $6.50) and $8.50, with a 5.8% margin to the deal price.