Smartphone maker BlackBerry today scrapped a sale plan and said it would instead raise as much as USD 1.25 billion through convertible debentures.
The company will also replace Chief Executive Officer Thorsten Heins, while John Chen, a director in Wells Fargo and The Walt Disney Company, will serve as interim CEO, BlackBerry said in a statement.
Former director Prem Watsa, whose Fairfax Financial had bid for BlackBerry, will return as Lead Director.
Watsa-led Fairfax Financial, the firm that signed a tentative agreement in September to acquire BlackBerry for USD 4.7 billion, will invest USD 250 million in the convertible debentures, BlackBerry said. Fairfax holds 10 per cent in the company.
BlackBerry shares fell as much as 18 per cent to USD 6.40 on the Nasdaq and later traded at USD 6.84.
The struggling smartphone maker has entered into "an agreement pursuant to which Fairfax Financial Holdings and other institutional investors will invest in BlackBerry through a USD 1 billion private placement of convertible debentures," the company said in a statement.
"The transaction is expected to be completed within the next two weeks," it said.
Heins, who was appointed as BlackBerry President and CEO in January 2012, will step down and Chen will serve as interim CEO pending completion of a search for a new Chief Executive Officer, it added.
"Upon the closing of the transaction, John S Chen will be appointed Executive Chair of BlackBerry's Board of Directors and, in that role, will be responsible for strategic direction, strategic relationships and organisational goals of BlackBerry," the statement said.
Watsa will be also be appointed Chair of the Compensation, Nomination and Governance Committee.
"I look forward to rejoining the BlackBerry board and to working with the other directors and management team, under John Chen's leadership, to shape the next stage of BlackBerry's strategy and growth," Watsa said.
Fairfax is a long-time supporter, investor and partner to BlackBerry and with this investment, reinforces its deep commitment to the future success of the company, he added.
The financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing its substantial cash position, Chair of BlackBerry's Board Barbara Stymiest said.
The company had cash of USD 2.6 billion as of August 31.
"Today's announcement represents a significant vote of confidence in BlackBerry and its future by this group of pre-eminent, long-term investors.
"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," Stymiest said.
