hobbit

Unless something goes horribly wrong with COVID in India in terms of a third wave which lasts for a few months. This is a 25+ stock in 1-2 years.

I am surprised how optimistic this board is regarding mgmt given that they have very little skin in the game and their history of screwing over minority share holders . Privi being the most recent example.

Doing this deal without any explanation tells you everything you need to know about the quality of people at Fairfax and what they think of minority shareholders. Is there any example of a large stake sale happening at such a steep discount ...ever? Typically the worst ones are at 5-10% premium over the share price. This is a terrible look on the mgmt in a market which is already skeptical and gives them a 30-50% discount to BV. Maybe rightfully so.

Thank you

Thanks Jfan and Xerxes. Do you happen to know if it was recorded, I cant seem to find the link.

Anyone attended the Virtual AGM? any notes would be appreciated . thanks

Anchorage is more like a platform to do future infra investments and due to that might even trade at a premium to BIAL valuation. They might sell more equity in anchorage separately through OMERS etc to do more investments

https://www.thehindubusinessline.com/economy/logistics/fairfaxs-prem-watsa-cast-eyes-wider-on-india-infrastructure/article33893957.ece

Has anybody done the arithmetic to figure out what value this might place on FFH India's 48.5% ownership? SJ This is the prospectus Seven islands shipping filed with SEBI. Numbers are on pg 58. Fairfax india invested at valuation ~170m. SIS should have annual PAT of 18mil growing at 30%+ which can conservatively translate to a multiple of 25+ , valuing the entire company at - 450m+ . 1613365652117.pdf

they are up 150mil + on just their IIFL holdings in the past 1 month

What makes you think this? they had a section in circular describing the conflicts policy -- The interests of Helios may conflict with the interests of the Corporation. The Corporation will rely on the expertise of Helios (including the Partnership and the Manager, in its role as sub advisor), in identifying and advising on investment opportunities, transaction execution and asset management capabilities. Helios also provides similar services to other subsidiaries of funds it manages. The advisory services to be provided by the Partnership under the IMA are to be provided on a nonexclusive basis to the Corporation and its subsidiaries, and accordingly, there are no restrictions on Helios from providing similar services to other entities, including certain funds managed by Helios, or from engaging in other activities in the future (whether or not their investment objectives, strategies and policies are similar to those of the Corporation). The Corporation acknowledges that Helios will allocate investment opportunities among the Corporation and its subsidiaries and the other portfolio clients of Helios in accordance with Helios’ Conflicts Policy. As a result of this Conflicts Policy, the Corporation may, from time to time, be precluded from participating in an investment opportunity available to the Partnership and the Manager, in its role as sub advisor, that would otherwise be compatible with the Corporation’s investment objectives and restrictions.

I thought the plan for Helios was that partnering with Fairfax will give them more cred in the global market and help them with fund raising at their end . This is just asking Fairfax for money right after the close. and why is Fairfax bothered with Helios' second best ideas ( the first will go to the helios' fund I presume ) . Fairfax can get better exposure by investing directly in Fund 4 of Helios. And Fairfax has to underwrite the ' reference investments' ? why is that... what a mess...

V what is the based on ? The difference between the old valuation and the one just announced ;) Thanks ... haha Didn't realize it was that big and it was re-valued recently. Thought it was a walnut size investment. Actually, i remember now that Amazon was also an investor in it (small amount). 09/30/2019: $100-$500 million valuation 12/10/2020: $800-$900 million valuation 01/15/2021: $1.9 billion valuation Mind you, these unholy valuations are in the age of low interest rate. Was there a strategic rationale that you recall as to why Digit was not part of FIH's portfolio ? Good news is that tomorrow, is the ex-dividend date, so if the share price was being bid up by unholy traders bent on capturing the jumbo-dividend, that should take some wind out of its sail. On a different note, for the hope-FFH-sell/trim Blackberry crowd. Imagine if BB was a private company (wholly owned by FFH), you wouldn't see any of these emotions and reactions. When was the last time anyone here complained about AGT Food strategy on a quarterly basis. The fact is BB had to transition from a $20 billion phone business into $+1 billion software business all in a public forum for all to see as it went 2 steps forward, 1 step back, but always moving forward. That and also it is not that there are no suitors. There is always a buyer at a price. Chen's job is to complete his job before being able to sell it at a valuation worth of its potential (if needed) for an agreed upon purchase price. As per this article FIH is an investor in Digit. I dont think FIH has mentioned this anywhere though https://www.vccircle.com/fairfax-a91-partners-backed-digit-insurance-is-india-s-newest-unicorn/

Fair to assume Bangalore airport deal with OMERS did not close this quarter ? or they would have provided an update

https://ca.finance.yahoo.com/news/atlas-mara-limited-announces-strategic-155000677.html The transaction will include upfront cash consideration payable at closing equal to approximately 0.8 times book value as of 30 June 2020, plus additional cash consideration payable 24 months after closing of the transaction, subject to certain conditions. https://www.benzinga.com/pressreleases/20/11/ac18543273/atlas-mara-limited-announces-strategic-transaction-with-kcb-group-plc As part of the Transaction, KCB will acquire Atlas Mara's 62.06% shareholding in Banque Populaire du Rwanda Plc ("BPR") for cash consideration representing approximately 1.09 times book value and, through the Company's subsidiary ABC Holdings Limited, all of Atlas Mara's indirect interests in African Banking Corporation Tanzania Limited ("BancABC Tanzania") for cash consideration representing approximately 0.42 times book value. The actual cash consideration payable by KCB will be determined based on the final book value of the two banks at completion of the transactions. The transactions are expected to close during the first half of 2021, assuming regulatory approvals are received by then. https://www.bnnbloomberg.ca/nigeria-s-biggest-bank-in-talks-to-buy-atlas-mara-assets-1.1530545 Do not be surprised if this happens close to BV as well which leaves them with UBN and following are the latest results for the same https://thenationonlineng.net/union-bank-grosses-n118-8b-in-q3/ Chief Financial Officer, Union Bank of Nigeria (UBN) Plc, Joe Mbulu noted that the bank’s asset quality has continued to improve with non-performing loans (NPLs) down to 3.6 per cent from 5.8 per cent as at December 2019, supported by ongoing efforts to diversify loan book to include viable businesses and households. “Our Capital Adequacy Ratio remains robust at 19.5 per cent, well above the regulatory threshold. With the $40 million financing secured from the International Finance Corporation for on-lending to trade finance customers, we are continuing to expand our funding engagements with DFIs to support our strategic business initiatives. Again not surprised with zero transparency from FFH and FAH mgmt on why ATMA was sold to FFH for 0.25*BV except saying helios did not want it . FAH is leaving close to 100 mil on the table by doing this deal with Helios which brings only 5 mil to bottom line for now on annual basis. If Helios was so keen on partnering with FFH , they could have done this deal with Helios and kept ATMA at the same time . They can sell it for 40 mil whenever they want or much more if they market it properly. And moreover FFH is only paying 20mil upfront. What a joke. I do not know why helios did not want it , may be they got the jitters after the deal with Equity group fell through. The only explanation is that FFH benefits at the expense of FAH shareholders and no one seems to care since there is no 'smart' money in FAH to seek an explanation from FFH.

https://www.business-standard.com/article/finance/explained-how-the-kerala-based-csb-bank-made-a-dramatic-turnaround-120111801497_1.html Essentially - New Mgmt with Fairfax appointed CEO Sacked around 1200 people , average age of employees dropped from 50 to 36, productivity went up . Labour cost to income was 26 % as compared to industry average of 10 . it came down from 26 to 15 % in 1.5 years Cut down on corporate lending , increased focus on retail ( gold ) and SMEs . Had earlier struggled with high NPAs in corporate lending Forecasting growth of 25% and looking to acquire another mid sized bank

Michael Wilkerson in Annual Letter , Q1 investor call , ATMA earnings -- - Tangible book value of $2 ( June 2020 ) - UBN doing well even in COVID. NPAs stable -"All operating banks maintained capital adequacy ratios above the regulatory minimum, reflecting stable balance sheets." ( june 2020 ) Michael Wilkerson in circular - - happy to sell ATMA stake at 0.55 without ever trying to market it to a third party apart from Fairfax. And since its a related party transaction they need a majority of minority shareholder to approve this. - The reason Fairfax is paying 40mil is because they cannot pay more than 25% of market value of FAH without a formal valuation , this being a related party transaction. Its hard to imagine a scenario where they try to sell their stake at a 50% discount to TBV and there are no takers . But they didn't even try. "MI 61-101 provides that, unless exempted, an issuer proposing to carry out a related party transaction described in paragraphs (a) through (g) of the definition of “related party transaction” is required to obtain a formal valuation in respect of the transaction. Fairfax Africa is relying on the formal valuation exemption in section 5.5(a) of MI 61-101 given that, at the time the Atlas Mara Transaction was agreed to, neither the fair market value of the subject matter of, nor the fair market value of the consideration for the Atlas Mara Transaction, exceeded 25% of Fairfax Africa’s market capitalization." Moreover Michael Wilkerson/Prem has taken 'zero' responsibility for the destruction of shareholder capital. Not in one annual/interim report/call the mgmt has admitted that they made terrible investments one after the other. Until announcing this deal they have maintained ( until as recently as April 2020 call) that the prices are just depressed and provide no insight into the intrinsic value of businesses. I don't understand on what basis Mr Wilkerson is being retained as an executive chairman of the new entity. As per the circular Helios brings the the depth and local connections including knowledge of french which is now apparently necessary for making good returns in Africa ;D. Idk on what basis was the current mgmt investing in Africa if as per the circular they had such limited knowledge of African market . This situation provides a good deal of insight into the muddled thinking at Fairfax group where they have been blaming market for being overvalued over the past decade while investing in gems like BB, ATMA, RFP, CIG etc . No wonder their shares are being sold at a 50% discount to BV across FFH, FIH and FAH. They have given market no reason to believe that they are trustworthy , transparent and will actually admit/learn from their mistakes going forward. Contrast this behavior with someone like Pabrai who has also had pretty underwhelming returns over the past 3 years but admits to his mistakes openly in letter and hopes to draw some lessons.

https://www.moneyweb.co.za/mny_sens/consolidated-infrastructure-group-limited-cautionary-announcement-and-changes-to-the-board-of-directors/ All Fairfax Africa nominated directors resigning from CIG

https://www.business-standard.com/article/economy-policy/cargo-traffic-at-bangalore-international-airport-rises-139-in-h1-fy21-120102101095_1.html

Lets assume deal does not happen, whats the downside at these prices with 100 + 40 mil in cash and zero debt I think you're referencing cash & equivs from the 2019 annual report. Their position is radically different now. During the financial panic earlier this year they basically had to step in as the de facto Federal Reserve for their bank investees. Now their cash & equivs position is down to $68 million of unrestricted cash (and an additional $18 million of restricted cash - locked in bank accounts at investee banks to help them avoid being forced by regulators to raise super-expensive capital). Regarding downside risk of a failed Helios deal I think you have to look at: - liquidation value of the assets after a failed deal - future value of assets in a deteriorating portfolio that has been poorly managed since inception (improperly sized investments in geographies and businesses outside of management's circle of competence) - odds Prem will either liquidate the portfolio and return more cash to shareholders than the current market price, or find new management that can shore up the portfolio and better execute the Africa investment strategy. If the Helios deal fails you might be able to make the case for a liquidation value of as much as, say, $325 million. But, I don't think there's as much margin of safety as you might think. I think the portfolio is basically one negative economic shock - like war or another oil price collapse - away from being impaired to $225 million or less. Also, the portfolio's current manager is not right for the job, but how do you attract a new management team with the requisite talent to manage such a small portfolio? I'm assuming you would need at least a billion dollar portfolio to attract/compensate an effective management team. Further, how would Prem be able to raise a billion dollars to right-size the portfolio given the failed track record? Honestly, I think Prem pretty much HAS to either do the deal with Helios or liquidate ASAP - and both sides know it. I think Prem and Tope are reasonable and will deal fairly with each other. But, I think Prem is in a tough situation. Does he give up majority control (I doubt it, but it might be the best solution)? Does he commit Fairfax to buy/guarantee more of the assets (tough call)? Does he infuse more cash into FAH by issuing more FAH shares - diluting current owners (another tough one)? After all those considerations my opinion is the range of outcomes is too broad for FAH to be a sound investment for a minority equity owner. I think there are plenty of scenarios resulting in permanent loss of capital, thereby making this a value investing anathema. (PS. I'm going to feel REALLY dumb when this deal sails through as it was originally laid out and the stock price jumps 50%. Haha. Oh well.) one of the conditions of closing " As of immediately prior to Closing, the Buyer Entities shall have Cash equal to at least the sum of $102,000,000, including Cash deposits held at any Portfolio Investment of the Buyer, plus the undrawn amount under the Atlas Mara Facility less any Transaction Expenses paid for by any Buyer Entity prior to such calculation of Cash;

Lets assume deal does not happen, whats the downside at these prices with 100 + 40 mil in cash and zero debt

This is FAH purchasing their own shares. They have not done that since april 2020. FFH acquiring shares of FAH in open market is a good sign for the deal.

Why’s 2099 shares a day the magic number? Are they limited (as the issuer would be for an NCIB)? Capped at 25% of daily average trading volume

https://www.canadianinsider.com/company?ticker=FAH FFH buying more FAH in the past couple of months

It will also be important to see whether OMERS renegotiates the valuation of the airport or goes ahead with 2.7B. The transaction is supposed to close by the end of Q3 2020. Why would OMERS renegotiate? They get a free look at the upside, and FIH makes them whole with a bigger ownership if the IPO doesn't price out. In many ways, the deal could be spectacular for them as written. If things stay slow for the duration of their option, they will end up with a bigger percentage of an irreplaceable infrastructure asset at a deep cyclical low price. Because the ratchet clause only kicks in if the valuation goes below 1.3B in an IPO which in very unlikely even in a worst case scenario. Also OMERS 'upside' in a worst case scenario is capped - " It is intended that Anchorage will be listed by way of IPO in India by December 2021 using commercially reasonable efforts, subject to regulatory approvals and market conditions. The third party investor will receive incremental shares of Anchorage to compensate for the amount by which the valuation of Anchorage upon closing of the IPO is below approximately 91.6 billion Indian rupees (approximately $1.3 billion at period end exchange rates). For any IPO valuation lower than approximately 70.3 billion Indian rupees (approximately $1.0 billion at period end exchange rates), the third party investor will receive no additional incremental shares of Anchorage. " Given that all the publicly traded airports ( except china) are down 30-50% , OMERS can ask for a lower valuation around 1.8 - 2B