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cogitator99

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Everything posted by cogitator99

  1. But probably something he never seriously considered, jay. ;)
  2. Top 10 US Positions QCOM ORCL AIG DTV GM NOV CHK DE MDLZ NWS Cash - 18%
  3. Recently added to DE & GM. Recently initiated CHRW & KMI.
  4. +1. I think some of the posters reacting a little too negatively. It's unfortunate that PW made all those confident statements in public, but its quite likely that he discovered compelling reasons during the intervening period that caused him to strike off in a different direction. We will see soon enough -- the story has yet to be fully written. As for the merger arb trade, its not like PW pressed the "buy" button for you.
  5. An HK ETF probably is not the best way to go. Right now A-shares trade at discounts to H-shares (a few years back it was the other way around); they might be buying the A-shares.
  6. " I think the breakup value is conservatively $5 per share (others on the BBRY thread would disagree), so I don't think there is much more to lose here and I think PW's reputation and Fairfax's fair and friendly acquisitions brand is worth more than the possible savings that would be achieved from a lower purchase price. Many arbs will be unwilling or unable to take a position without a definitive agreement, so the "spread" (hard to call this a true spread without that definitive agreement) is likely to stay pretty wide unless there is a leak about a higher bid. As an aside, this does not seem to me like a Warren Buffet-like move. I believe that if WB wanted this asset, he would have signed a definitive agreement over the weekend that PW signed a highly-conditional LOI. That would be moving incredibly fast, but I think WB would have gotten it done. Though BBRY is not the type of asset for which WB is looking (I'm confident it would be in his "too hard" pile)." *** How do you get to your $5/sh? I note that's not small downside from here. And though it certainly doesn't seem likely we'll get there, BBRY has surprised a lot of otherwise sharp value guys on the downside. In reality we are relying on PW being true to his word and providing a floor here. If this would be in WB's "too hard" pile then perhaps it should be on PW's also...not like PW is a 25-30 year-old technologist...at the very least I hope there is someone in his team with the skill set. Not knocking FFH at all -- I have tremendous respect for their track record -- but this is one of the toughest businesses out there. I liked your post -- you've thought it through. Thanks.
  7. The bulk of it, likely. Given the public declaration and all. To do something so publicly and have it fall apart is probably not an option -- if he can help it.
  8. Just started reading the same book. Am wondering if ORCL should be a larger position in our portfolio.
  9. From the Globe & Mail: *** A shareholder pelted the Bank of Ireland’s top brass with eggs at the company’s annual meeting in June, 2011. The bank’s shares, which traded near €12 in early 2007, were closer to 11 euro-cents by early July. The Irish government already owned more than one-third of the bank and it looked like it was going to have to take control. CEO Richie Boucher, prodded by the government, worked to keep the bank from becoming a ward of the state. On July 17, in a piece headlined “Poor old Richie,” the Sunday Times said “the chances of the bank raising €1.9-billion in new equity, and staying out of state control, range from slim to impossible.” Within 10 days of that report, Fairfax Financial Corp., with a consortium of investors, agreed to inject about €1.1-billion ($1.5-billion Canadian at the time) into the lender, Ireland’s oldest bank. The 35-per-cent stake that they bought helped Bank of Ireland emerge as the country’s only lender to avoid nationalization. The deal was done for ten cents per share, and the stock has since more than doubled. Mr. Watsa brings up the Bank of Ireland scenario to explain why he sees value in BlackBerry, and why he has no doubt that Fairfax will be able to pull off its preliminary $9-per-share bid for the troubled Waterloo, Ont.-based company. While there are few similarities between a bank established by Royal Charter in the eighteenth century and an IT firm born in the 1980s, both had important roles in the economies of their respective countries and both were buffeted by industry upheavals that only the most prescient investors saw coming. Mr. Watsa, more than most other financiers, is willing to look at the bigger picture. “I’m not underestimating their short-term problems,” he said in an interview. “I’m just saying to you that these things happen all the time. Richie Boucher told me that no one would lend the country of Ireland any money – forget the Bank of Ireland.” Mr. Watsa, who keeps an analyst report in his office from the late 1990s that predicts that Apple could go bankrupt, is not gambling on returning BlackBerry to its glory days. He’s gambling on it being in a better position in the future than it is now. “It’s a good company, it’s a good product. Otherwise nothing could help it,” he says. “Can it compete in the consumer market with Apple and Samsung and the Android? No, we think that’s very tough. But in the enterprise market they’ve got huge advantages.” Fairfax and its unnamed potential equity partners have been given six weeks for due diligence on BlackBerry, and Mr. Watsa says a final offer will be presented by Nov. 4. It was during a Berkshire Hathaway shareholder meeting in 2010 that Mr. Watsa, dubbed “Canada’s Warren Buffet,” met the person who would put Bank of Ireland on Mr. Watsa’s radar: Bill McMorrow, founder of Beverly Hills-based real estate firm Kennedy Wilson. In 2011, as the Irish bank foundered, Mr. McMorrow was negotiating to buy some real estate loans from the lender. He let Mr. Watsa know that he was impressed with Mr. Boucher, which prompted Mr. Watsa to follow up. “We had a very, very tight timeframe to work with the government to get a deal,” Mr. Boucher recalls. “I had a long conversation with Prem, talked about the company and what we were trying to do,” he says. “He said he’d like to think about it. We had another conference call for about four hours on the Saturday, and he rang me back in the afternoon and said that himself and his colleagues were coming over on Sunday... “We could see very quickly, because we’d been talking to a number of people, that they were very experienced at doing due diligence,” Mr. Boucher says. “They pulled in resources from other people they knew to do specialized due diligence.” “[Prem Watsa] said at the time, and to be honest I didn’t believe him, he said he could bring in some very heavyweight investors if the idea was good enough,” says Denis Donovan, a senior executive at Bank of Ireland. “And he was absolutely right.” U.S. private equity funds and others had been looking at the bank, but most wanted the Irish government to backstop any potential investment to reduce their risk. Mr. Watsa had Canadian Western Bank help with the due diligence, and over a period of about two weeks a team of people combed through the bank’s loan books and questioned its credit officers. The team came away believing that the bank, which had modeled its property portfolio based on Nevada’s property meltdown, had taken larger writedowns than even a worst-case scenario would have warranted. Billionaire investor Wilbur Ross, known for turning around troubled companies, had already been active in the Irish banking sector, and Fairfax reached out to him. Together, the two groups sought out Fidelity Investments and the Capital Group, and the investment was made. “Can you imagine that at 10 cents no one wanted it?” Mr. Watsa says. “Everyone who had put money into the Bank of Ireland until that time had lost money.” “The market’s very emotional,” he adds. “You’ll find huge optimism when everything’s going well, huge pessimism when things are not working out as well. And what we say is the truth is in between.” “If you read the press and you read these analysts, it looks like [blackBerry] is going bankrupt. And five years ago it looked like RIM controlled the world. And both views are wrong. It wasn’t one, we found out, and we’re suggesting to you with humility that the second one is wrong.“ Mr. Watsa claims BlackBerry’s customers are jittery because its fate is uncertain, but will feel more confident and start buying more once the deal is done. “What we’re doing here is simply doing our due diligence to figure out what’s needed to finance it over the long term, and then raising the money to have a capital structure that will help the company over the long term,” Mr. Watsa says, adding that the company won’t have too much debt. “We want BlackBerry to survive for a long time,” he says. “Which means that it needs to have a very sound capital structure, and we’re going to focus on making sure that that takes place.”
  10. From Bloomberg. Apologies for the formatting, have no idea how to do some kind of word wrap here. *** Sept. 30 (Bloomberg) -- BlackBerry Ltd. was so desperate to find a buyer that it agreed to pay its biggest shareholder a rare breakup fee for a tentative takeover offer -- a move that could deter rival bidders. The struggling smartphone maker last week said a group led by Fairfax Financial Holdings Ltd., a Toronto-based insurance company, signed a letter of intent for a $4.7 billion buyout. While Fairfax Chief Executive Officer Prem Watsa hasn’t yet identified the rest of the buyout group or obtained committed financing, BlackBerry agreed to pay the group a $157 million fee if it strikes a better deal with another buyer. BlackBerry’s willingness to agree to a fee without signing a definitive agreement is “unheard of” and may have a chilling effect on its auction, according to Tor Braham, the former head of technology investment banking at Deutsche Bank AG. If a higher bid comes along, Watsa -- a BlackBerry board member until last month -- gets the termination fee plus he can cash out on an almost 10 percent holding. “It’s a desperate situation,” Willy Shih, a professor of management practice at Harvard Business School and former executive at Eastman Kodak Co., said in a phone interview. “The terms of the deal recognize their difficult situation. Fairfax is pretty shrewd.” This is a “beautiful” deal for Watsa, Shih said. BlackBerry spokesman Adam Emery declined to comment on how the termination fee structure affects the auction. Paul Rivett, president of Fairfax, didn’t respond to e-mails or phone calls seeking comment on the deal terms. Breakup Fee Should it back out of the tentative agreement, BlackBerry will owe Fairfax a fee of 30 cents a share, or about $157 million, the Waterloo, Ontario-based company said in a Sept. 23 statement. The agreement doesn’t say that Fairfax, whose offer is still subject to due diligence and negotiation, owes BlackBerry anything if its proposal isn’t consummated. BlackBerry won’t owe a fee if the consortium lowers its bid below $9 a share without board approval. The breakup fee rises to 50 cents a share, or about $262 million, if the smartphone maker and Fairfax sign a definitive transaction. That higher fee is about 5.6 percent of the deal value, above the average termination fee of 3.5 percent for U.S.-based targets in 2012, according to a June report by investment banking firm Houlihan Lokey. “It’s highly unusual that a seller gives a breakup fee to a buyer with no committed financing,” Morton Pierce, a New York-based partner in the mergers and acquisitions group of law firm White & Case LLP, said in a phone interview. “You don’t do that if you have options.” Disappointing Earnings BlackBerry is eliminating a third of its staff and refocusing on only business customers after quarterly revenue missed analysts’ estimates by half. Sales in the Americas fell faster than anywhere else, tumbling 56 percent to $610 million for the three months through August. Investors remain skeptical about a better deal, with the stock closing last week about 11 percent below Fairfax’s offer of $9 a share. The fee “very well could be enough money to deter a private-equity fund from jumping in,” Braham said by e-mail. A leveraged buyout firm “would inherently be tight for capital, and having to borrow an extra $150 million to go to Fairfax could make someone say, ‘Life is too short.’” No Confidence Bankers had been canvassing potential buyers in search of a deal for almost a year, two people with knowledge of the matter told Bloomberg News in August. JPMorgan Chase & Co. and RBC Capital Markets quietly contacted possible bidders and found little interest in the whole company, especially among private- equity firms, said the people, who asked not to be named because the talks were private. Silver Lake Management LLC, which is taking struggling personal-computer maker Dell Inc. private for $24.9 billion with founder Michael Dell, said it looked at taking a stake in BlackBerry and decided against it. “We don’t have enough confidence to underwrite what the business plan will look like,” Michael Bingle, a managing partner at the private-equity firm, said Sept. 27 at a conference in New York. “When you don’t have that confidence, it’s tough to really pursue this opportunity.” Two of Canada’s largest pension funds, the Ontario Teachers’ Pension Plan and the Alberta Investment Management Corp., held preliminary discussions with Fairfax about its bid for BlackBerry, two people familiar with the talks said. The funds aren’t interested in backing a bid for the whole company and haven’t joined the bidding consortium yet, the people said last week. ‘Free Look’ While the termination fee isn’t necessarily a “deal killer” for potential rival bidders, it’s more likely to help Fairfax find firms to join its consortium, said Colin Gillis, an analyst at BGC Partners LP in New York. “Fairfax gets a free look and can walk away with no penalty until Nov. 4th,” Gillis said in a research note last week. “The risk of a bidding war breaking out for BlackBerry is low, particularly given what we view are favorable terms to Fairfax.”
  11. If we truly believe that Prem will move forward with the bid @ $9, should we be buying BBRY @ $8 for the arb? It seems to me that Prem would not have done this unless he had though things through, which includes the possibility that outside funding would be hard to raise? It's a mind-read but I would think that you'd announce something like this only if you had already lined up the potential investors. What would the downside be if the bid falls through? Any SWAGSs (scientific-sounding wild-ass guesses)?
  12. Fairfax to take BlackBerry private in $4.7B deal. BlackBerry (BBRY) has signed a letter of intent to be acquired by a consortium led by Prem Watsa's Fairfax Financial for $9/share in cash, or $4.7B. Fairfax will merely roll over its existing 9.9% stake into its buyout offer, and won't invest any more cash. Prem Watsa told Bloomberg his firm will rely on other investors to finance the rest of the deal via equity and debt. The consortium is described as "in flux," and BBRY is free to look at competing bids until due diligence is completed.
  13. Might prove to be remarkably prescient DCG ;)
  14. From what I've read, FFH won't be putting in more money but will simply roll over its 10% stake. Which raises the question, who are the other investors? Also, there are break-up fees to the deal. $157 mn or so if BBRY walks away, higher if they walk away after signing a definitive agreement. Given about 60% of market cap is cash it's not so bad, but they don't have a lot of time. They have to get the burn under control. It would be nice if Watsa can get Lazaridis on board here as well.
  15. Well below cash. If you notice the volatility in the US ADRs far outstrip that of the main listing, so often there's a significant spread between the ADRs and the latter. What I don't understand is what they plan to do from here. It also bothers me that insiders have kept selling all the way down.
  16. And how do you feel now Palantir?
  17. Wasn't that more of a liquidity thing than a "failing because your assets are worthless and you have no long-term earning potential anymore" situation, though? I think the government made money on most of the bailout and got out of most things it injected capital into. That's different from nationalizing institutions that have no real profitable business and leaving the taxpayer money into them to be destroyed over time... That's my understanding, anyway. Saying "they were failing" hides that fact that there are many ways to fail, some less recoverable than others (f.ex. The difference between John Malone getting a margin call because he was over-stretched - bad but if he can get through he still owns good productive assets - and someone else running a business into the ground because the fundamentals are terrible and that can't easily be fixed, so that even if you save them, it's just temporary and they'll keep destroying value). I think that's a good point. Just adding another point on why I too think its a stretch to think that the US will end up like Japan. My general observation is that the US system itself is more resilient than is otherwise believed elsewhere around the world. I remember during the GFC how smug some people were...let's say the Chinese...about how their model was demonstrably superior than that of the US. Kind of similar to how Japan related to the US in the 1970s-1980s. (We all know how that worked out.)
  18. You might want to take a look at Cielo (CIEL3).
  19. Korea is definitely interesting given valuations. Any Koreans on here that care to share some ideas?
  20. Agree with this. Plus if you were nervous about a manager's style -- and this has been his style all along -- why invest with him in the first place?
  21. That may be the case, but certainly if you had lost faith in Berkowitz you probably would've sold a while back... Also, I don't understand all the fuss about his concentration. From an overall portfolio standpoint you probably would not be 100% FAIRX and if you were, you had better believe that he knows what he's doing, and that he can do it far better than you can.
  22. Does anyone think its significant that FAIRX is opening at this point, after having been closed for only a short period of time? My initial thought was he has a massive new investment idea and would appreciate the capital to make a large investment. It may be the FNMA/FMCC prefs, or perhaps even something else. Any thoughts?
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