How will the company look after the Brit transaction?

[klarmanite]

Curious to hear from the community on how they see the company after the Brit purchase. Does anyone know to what extent the make-up of the Brit investment portfolio can/is likely to be changed?

 

I'm confused regarding the number of shares outstanding in Fairfax after the acquisition and the net effects on FRFH's book value, investment portfolio and earnings power. Any opinions would be appreciated.

 

 

[giofranchi]

A good enough article from Seeking Alpha was posted on the thread "Is it time to buy Fairfax again" just a few days ago.

 

Cheers,

 

Gio

[klarmanite]

I don't understand how this can be right. The author writes that investments per share will be 4747 USD after the transaction. How is that possible when Watsa writes in the annual letter to shareholders that Brit's total investment portfolio is 4 Bn USD (p. 6). This is confirmed by looking at the Brit PLC annual report which shows 2.6 Bn pounds in portfolio investments. 4 Bn added to FRFHs investment portfolio would add 171 USD per share of fairfax after 1.15m new shares are issued (total FRFH share count 23.35 m), no? With investments per share at 1124 at Q1 2015, the total investments per diluted share of FRFH should be 1239 USD.

 

On the other hands, Watsa writes on p.7 of the shareholder letter that "Brit's investment portfolio at the end of 2014 constitutes investments of 3510 USD per fairfax share versus 1237 per existing fairfax share currently". Which would take investments per share above the 4000 mark obviously.

 

So which is it? What am I misunderstanding?

[gfp]

The seeking alpha article they pointed you to is way off on the investments per share math.

[klarmanite]

Thought so. Couldn't make anything sensible out of it. But I don't understand the quote from the letter either.

[giofranchi]

Thought so. Couldn't make anything sensible out of it. But I don't understand the quote from the letter either.

 

Probably, Watsa is comparing what’s given away issuing 1.15 million shares to what is gained, therefore he is dividing the $4 billion portfolio of investments only by 1.15 million of new shares… Just a guess! ;)

 

Gio

 

[klarmanite]

Ah. Thanks Gio.