TwoCitiesCapital Posted April 17, 2015 Share Posted April 17, 2015 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. This makes sense - anyone know any details of the agreement? Are we buying back at a staggered set of prices in the future or is OMERS getting the same price plus some interest annually? Link to comment Share on other sites More sharing options...
hendrie Posted April 17, 2015 Share Posted April 17, 2015 I need some further clarification here. FFH believes that under their leadership (clout/connections/etc.) they will be able to run BRIT better than when it was public, hence why they purchased it (esp at 1.5x book). If this is the case, they will be adding value to the 29% owned by OMERS and will have to pay even more in the future. Why would they not purchase outright and issue additional FFH shares, then buy back shares with the profits from Brit? (FFH is trading at 1.5x BV) Link to comment Share on other sites More sharing options...
Zorrofan Posted April 17, 2015 Share Posted April 17, 2015 I need some further clarification here. FFH believes that under their leadership (clout/connections/etc.) they will be able to run BRIT better than when it was public, hence why they purchased it (esp at 1.5x book). If this is the case, they will be adding value to the 29% owned by OMERS and will have to pay even more in the future. Why would they not purchase outright and issue additional FFH shares, then buy back shares with the profits from Brit? (FFH is trading at 1.5x BV) My guess is that Prem wants to keep dilution at a minimum and will pay for the remaining 29.9% out of profits from BRIT...... cheers Zorro Link to comment Share on other sites More sharing options...
bluedevil Posted April 17, 2015 Share Posted April 17, 2015 There seems to be a Globe and Mail article addressing this issue, but i can't access it as it is behind a wall. The teaser says "Fairfax Financial Holdings Inc. chief executive Prem Watsa says his bearish market views played a key role in a recent pension fund partnership." Link to comment Share on other sites More sharing options...
Guest glavacem Posted April 22, 2015 Share Posted April 22, 2015 There seems to be a Globe and Mail article addressing this issue, but i can't access it as it is behind a wall. The teaser says "Fairfax Financial Holdings Inc. chief executive Prem Watsa says his bearish market views played a key role in a recent pension fund partnership." The article basically said Prem is still worried about a correction and that he wanted to maintain a strong balance sheet with lots of cash....hence taking on a partner for this deal. Link to comment Share on other sites More sharing options...
dartmonkey Posted April 22, 2015 Share Posted April 22, 2015 We don't know what kind of arrangement Fairfax has made with OMERS, but there is no reason to assume that Fairfax will have to pay more for the last 30%. This looks more like a loan than a sale. Link to comment Share on other sites More sharing options...
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