FFH says entered into MoU with OMERS to sell up to 29.9 pct of BRIT

[nwoodman]

Cripes, that was quick

 

http://www.reuters.com/article/2015/04/15/idUSL5N0XC0QH20150415

 

cheers

 

nwoodman

[petec]

What's the point of that?  I could understand if they were funding from cash and it hurt liquidity, but they raised a lot of equity and prefs?

[TwoCitiesCapital]

What's the point of that?  I could understand if they were funding from cash and it hurt liquidity, but they raised a lot of equity and prefs?

 

This is what has me confused too.

 

I was pretty excited about the Brit acquisition. Was less excited about the share issuance, but I get it. I'm sure this isn't the whole story, but without knowing what they're going to use the proceeds for I can't help but feeling slightly disappointed.

[Jurgis]

Yes, this is rather WTF...  :o

[Zorrofan]

A bit more info.....

 

http://www.theglobeandmail.com/report-on-business/omers-to-buy-30-stake-in-brit-from-fairfax/article23964950/

 

Is FFH looking to OMERS as a partner much like BRK and 3G??  Not that OMERs would run it but they could be a source of funds like BRK is to 3G.......

 

cheers

Zorro

[Jurgis]

This is still really weird. If they bought a good company, why would they sell 30% of it immediately??? It's not as if they don't have money for the whole thing. I just don't see why they need a partner.

 

Another explanation would be that they don't want more than X amount of business/exposure to what Brit is doing. But this also makes little sense: they can run it as conservatively as they want (unless there are some Lloyd's rules that I don't know), so why is bigger exposure an issue.

 

And why would they need cash now? It's not as if they have tons of bargains to buy... (Is BRK for sale?  ;D Just kidding...  :-X )

 

Edit: Also IMHO they have other things that they could dump for cash.

[bluedevil]

It is a surprising move based on the company's prior indications.  Though it was not said in so many words, I read Prem to be saying during the Brit conference call that they may partner up with someone to contribute equity or (if they had to in order to protect investment grade ratings) then issue FFH shares.  But, having issued shares and debt to fund the acquisition, I was surprised to hear that they had also brought another investor in.  I hope someone poses the question at the AGM so that we get more information on the company's thinking.  I can't make it to the meeting, sadly.

 

(I also hope someone asks about the company's plans with ICICI lombard now that the Indian FDI cap has been raised to 49%.)

 

[frommi]

Perhaps they just wanted control of BRIT`s investment portfolio and now want to reduce debt or they found some compelling things in india. I am pretty sure Prem is doing a good job in managing my money.

[barsax]

Given that FFH has recently raised cash through the sale of Irish Bank shares, IPO of Cara foods, and now this deal, I think its fair to say that Prem and his team have found something (or believe they've found something) to underpin future compound growth rate.  We'll know soon enough.

[Jurgis]

Given that FFH has recently raised cash through the sale of Irish Bank shares, IPO of Cara foods, and now this deal, I think its fair to say that Prem and his team have found something (or believe they've found something) to underpin future compound growth rate.  We'll know soon enough.

 

Or they are bulking up on cash expecting a crash... which may be good ... or not. ;)

[cwericb]

Market sure didn't seem to like the news. FFH.TO down 4% today. Wonder what they have up their sleeve?

[Jurgis]

I am reserving judgement, but I can see why market does not like this:

 

"Hey, we are buying this great company!"

"Hey, we have to do share dilution for this great company!"

"Hey, we did the share dilution and we will still only get 70% of this great (?) company"

...

::)

[petec]

I am reserving judgement, but I can see why market does not like this:

 

"Hey, we are buying this great company!"

"Hey, we have to do share dilution for this great company!"

"Hey, we did the share dilution and we will still only get 70% of this great (?) company"

...

::)

 

+1

 

However, I'm all in favour of share price falls at FFH :)

[Alekbaylee]

Could that be regulatory issues post-acquisition?

[FFHWatcher]

I trust that anyone guessing what might be happening behind the scenes and who may be disappointed, confused, WTF'ed, etc., with the OMERS involvement have a lot of billion dollar transactions on their resume?  Doesn't it kinda sound ridiculous for a few message board posters (who may have excellent investment results, may be CFA's or equivalent, or whatever) to be 'disappointed' with selling 30% of something FFH just bought?  If we were all that smart, knew all the answers, and had awesome plans for billion dollar buyouts, etc., we would be in the C-Suite at some billion dollar hedge fund or running billion dollar corporations ourselves and wouldn't have time to post here.  This isn't Prem's, the team at FFH or OMERS first rodeo.  Everything happens for a reason and the general public doesn't know all or really any of the facts.  Heck, until FFH bought Brit, I am guessing no one here had even heard of Brit and now they are questioning FFH's decision making. 

3 months ago Fairfax was $600 and it quickly went to over $700 and no even said a word (hey, it is like $6 going to $7.25...no big deal and now it has fallen back to $6.70....yawn)

Geez

[petec]

I trust that anyone guessing what might be happening behind the scenes and who may be disappointed, confused, WTF'ed, etc., with the OMERS involvement have a lot of billion dollar transactions on their resume?  Doesn't it kinda sound ridiculous for a few message board posters (who may have excellent investment results, may be CFA's or equivalent, or whatever) to be 'disappointed' with selling 30% of something FFH just bought?  If we were all that smart, knew all the answers, and had awesome plans for billion dollar buyouts, etc., we would be in the C-Suite at some billion dollar hedge fund or running billion dollar corporations ourselves and wouldn't have time to post here.  This isn't Prem's, the team at FFH or OMERS first rodeo.  Everything happens for a reason and the general public doesn't know all or really any of the facts.  Heck, until FFH bought Brit, I am guessing no one here had even heard of Brit and now they are questioning FFH's decision making. 

3 months ago Fairfax was $600 and it quickly went to over $700 and no even said a word (hey, it is like $6 going to $7.25...no big deal and now it has fallen back to $6.70....yawn)

Geez

 

I couldn't care less about the impact on the share price (other than if it goes low enough I'll buy more).

 

But I think it's legitimate to say, what's the point raising enough equity to buy 70% of this when you could have raised a bit more and bought 100%?  I'd understand if they hadn't raised equity and were buying with cash on hand, but that's not the case.

 

More generally, it is perfectly legitimate for shareholders to question management actions.  Management are not cleverer than me just because they have more experience or power.  In fact, I'd go so far as to say that a lot of corporate disasters would have been avoided if shareholders had been more critical.  So I reserve the right to ask any questions of management that I like, and criticise them if I don't like the answer.

 

 

[Jurgis]

+1 to what Petec said.

[cwericb]

I'm not sure people are being critical so much as being surprised at the move.

 

I for one, look at this as an interesting development because Fairfax knows what they are doing. This may have been the plan from the start or it may be that they have something else in mind.

 

I am sure we will find out what their game plan is shortly.

 

But there is no justification to try to second guess these guys when none of us have access to the information Fairfax has so how could any of us be qualified to second guess them?

 

As far as share price is concerned, it is simply a poll indicating what other investors think - and we all know how inaccurate some polls can be.

[petec]

And now they're saying they are going to buy the shares back at some point...my head hurts!

 

Presumably they have given a fuller explanation but I haven't seen it yet.

[obtuse_investor]

Prem explained the reasoning during question period at the annual meeting today.

 

Perhaps someone who took notes can post here?

[Phoenix01]

Prem explained the reasoning during question period at the annual meeting today.

 

Perhaps someone who took notes can post here?

 

FFH could comfortably purchase the 74% that was being offered by the two private equity firms.  They were then going to buy the balance over years, using internally generated profits.  Regulations required them to buy the whole company.  The arrangement with the pension fund is for FFHto buy back the balanceover the next few years.

 

FFH could not telegraph their moves or else they would have been at a commercial disadvantage.

[Jurgis]

OK, I think that makes sense.

 

Thanks

[bluedevil]

Thanks Phoenix for the helpful information.

 

Any discussion of how the pricing for the repurchases will work?

[Phoenix01]

Thanks Phoenix for the helpful information.

 

Any discussion of how the pricing for the repurchases will work?

 

I did not get any further info, but I think that it will come out soon enough.  Maybe someone else got more info.

[Daphne]

I'll just add that under UK regulations as long as  24% of BRIT remain outstanding FFH can't take the company private hence the need/ desire to buy up the balance over time