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

[TwoCitiesCapital]

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?

[hendrie]

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)

 

 

[Zorrofan]

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

[bluedevil]

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."

 

 

 

[Guest glavacem]

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.

[dartmonkey]

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.