BlackBerry Investor Prem Watsa Famous for Making Contrarian Bets; The Head of Canadian Firm Fairfax Financial Is Often Compared to Warren Buffett

September 23, 2013, 7:30 p.m. ET

BlackBerry Investor Prem Watsa Famous for Making Contrarian Bets

The Head of Canadian Firm Fairfax Financial Is Often Compared to Warren Buffett

BEN DUMMETT and PAUL VIEIRA

The Canadian investor leading an effort to take BlackBerry Ltd. BBRY -2.38% private is famous for making big contrarian bets that often work out. Prem Watsa, who runs Toronto-based insurance firm Fairfax Financial Holdings Ltd.FFH.T +0.49% and until last month served on BlackBerry’s board, is often compared with U.S. investment guru Warren Buffett. Mr. Watsa has over the years focused on beaten-up stocks—including at times, his own—and has long explained his choices in plainly written annual reports that are closely followed by many investors.BlackBerry could prove to be the most challenging investment yet for Indian-born Mr. Watsa, 63 years old. After joining the board in January 2012, Mr. Watsa publicly stood behind Chief Executive Thorsten Heins‘ attempts to turn around BlackBerry’s operations in the face of mounting competition from the likes of Apple Inc. and Samsung Electronics Co.

But BlackBerry has left a trail of disappointments, including the two new devices it staked its resurgence on. The devices didn’t take off, and last Friday, it said it would write down nearly $1 billion in unsold phone inventory this quarter.

Mr. Watsa’s approach to BlackBerry is far from a done deal. The letter of intent remains subject to several conditions, including due diligence.

It also comes at a time when Mr. Watsa has so far incurred a big paper loss on his BlackBerry investment. Earlier this year, he disclosed that he paid an average of $17 a share for his 10% stake, almost double the $9 a share the letter of intent contemplates.

Mr. Watsa’s rise as a major investor started in 1985 when he reorganized an ailing trucking-insurance firm, renaming the company Fairfax, short for “fair and friendly acquisitions,” and used it to acquire other troubled property-and-casualty insurers.

In 2003, the company struggled with surging claims costs from the Sept. 11, 2001, terrorist attack, natural disasters and debt accumulated from acquisitions made in the late 1990s. Fairfax’s stock tanked, but Mr. Watsa regrouped and ultimately restored the firm to good health.

His star rose again near the end of the last decade, as he bet against rising U.S. housing prices. Fairfax generated more than $2 billion in gains by acquiring credit-default swaps between 2003 and 2007 and then selling the protection to financial institutions seeking safety from the collapse of the subprime mortgage market in the U.S.

The success of a Fairfax-led consortium to acquire BlackBerry would remove a potential headache for the Canadian government, which might find itself under pressure to intervene if a foreigner makes a bid for what was once a national tech icon.

Even though BlackBerry’s woes are well documented, its success over the years was held up in this country as a sign of Canadian innovation and entrepreneurship. Over a year ago, Prime Minister Stephen Harper warned his Conservative government might not look too kindly on a foreign takeover of BlackBerry, as losing access to such a “critical technology” wouldn’t necessarily serve Canada’s best interests.