TORONTO – BlackBerry (NASDAQ:BBRY) abandoned its sale process on Monday, and announced it will replace its chief executive.

Fairfax, BlackBerry’s largest shareholder with a 10 percent stake, said it won’t buy the struggling smartphone company and take it private but said it and other investors will inject $1 billion as part of a revised investment proposal.

BlackBerry says CEO Thorsten Heins is stepping down. Heins took over in early 2012 after the company lost billions in market value.
Former Sybase AG CEO John Chen will become executive chairman, putting him in charge of the company’s strategy. In premarket trading, BlackBerry shares dropped $1.44, or 19 percent, to $6.33 before being halted.

“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,” Barbara Stymiest, the company’s chairman, said today in the statement. “This financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position.”

Fairfax, a Toronto-based investment firm, had until 5 p.m. today to come forward with a more definitive offer for the Canadian smartphone maker, following the preliminary takeover proposal it made six weeks ago. The company had been struggling to attract the financing for the deal, according to people familiar with the deliberations. It also never named any other members of its takeover coalition.

BlackBerry kicked off the bidding process in August when it said it would consider selling the company as part of a strategic review. At the time, Fairfax CEO Prem Watsa left the smartphone maker’s board so he could pursue a deal. He will now be rejoining the board as lead director.

BlackBerry announced in September that Fairfax Financial Holdings Ltd. signed a letter of intent that contemplated buying BlackBerry for $9 a share, or $4.7 billion, and taking it private. Fairfax said then it wouldn’t increase its 10 percent stake and the company went about trying to attract other investors.

“They never had any money beyond the Fairfax money,” BGC analyst Colin Gillis said. “It’s an under $5 billion market cap company with $2 billion in cash, you put up a $1 billion and you couldn’t get the rest?”

Gillis said it’s not an unexpected outcome because the stock was trading well below the possible $9 bid price. He said potential investors must have looked at the books and didn’t like what they saw.

The BlackBerry, pioneered in 1999, had been the dominant smartphone for on-the-go business people and other consumers before Apple debuted the iPhone in 2007 and showed that phones can handle much more than email and phone calls. In the years since, BlackBerry Ltd. been hammered by competition from the iPhone as well as Android-based rivals.

In January, the company unveiled new phones running a revamped operating system called BlackBerry 10 designed to better compete but the phones did not sell well.

(The Associated Press and Bloomberg News contributed to this report).