Fairfax takes hit before BlackBerry deadline

The fight for BlackBerry’s hand took another turn as the company at the centre of the most concrete bid to-date to buy the struggling smartphone vendor reported significant losses over the last quarter.

Fairfax Financial, which proposed a US$4.7 billion buyout in its Sept. 23 provisional offer, had established a six-week due diligence period to give it sufficient time to build its investment consortium and finalize the financial terms. With the Nov. 4 deadline looming, the company announced late Thursday it had lost C$571.7 million – or $29.02 per share – in its third quarter compared to a profit of $33.4 million, or 84 cents per share, in the year-ago period.

Chairman and CEO Prem Watsa said in a statement while the company remains soundly financed, with $1.1 billion in net cash and marketable securities, short-term market fluctuations took their toll on the company’s bottom line.

“We were affected in the quarter with mark to market losses from bonds (because of rising interest rates in the quarter) and a mismatch in our equity portfolios between our common stocks and our hedges,” Watsa wrote, adding he remains confident that these results are based on short-term market fluctuations, and the company’s performance will improve over time.

“Our long term performance has been in excess of most indices. We continue to believe that the mark to market losses will reverse in the future,” he wrote. “We are maintaining our defensive equity hedges due to our concern about the financial markets and the economic outlook.”

If the quarter’s losses are weakening Fairfax Financial’s resolve to proceed with the BlackBerry deal, Watsa isn’t showing his hand. The company’s Q3 statements did not specifically mention the BlackBerry bid, and Watsa refused to respond to questions around the bid during an analyst call Friday morning, explaining that the due diligence period is not yet complete.

“We really can’t make any more comments on it until Nov. 4^th,” he told analysts.