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Fairfax deal with McEwan Group


Zorrofan
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Looks like a capital commitment to help grow the business.  Probably a minority stake and start to get the brand across Canada like Vij's.

 

I sure hope they have gift cards at next year's AGM for the McEwen Group...their lobster grill cheese at Bymark is amazing!  ;D  Cheers!

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I'm not impressed at all.

 

The food scene here is terrible. No one is raving about the food they'll eat at Harvey's, Swiss Chalet, Finn McCool's etc. Being satisfied with the choices we have is a testament to how apathetic we are as Canadians.

 

I just wish more of the U.S. chains either opened here (ie-Shake Shake, Shophouse, Punch Pizza) or opened more locations at a faster pace (Chipotle).

 

If Fairfax was investing in Thomas Keller I would be applauding this deal. Instead they're investing in a non-Michelin star chef with some average restaurants. Mark McEwan is no Danny Meyer or Thomas Keller.

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If Fairfax was investing in Thomas Keller I would be applauding this deal. Instead they're investing in a non-Michelin star chef with some average restaurants. Mark McEwan is no Danny Meyer or Thomas Keller.

 

Personally, I don't give a damn whether Mark McEwan has 0 Michelin stars, or 200 Michelin stars.  I just care whether FFH can make some money from this investment.  In fact, I wouldn't give a shit if they bought McDonalds shares as long as there is a solid expectation of profit....

 

I guess time will tell whether the McEwan Group will scale adequately to make this worth FFH's time and attention.

 

SJ

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Very strange.  It's hard to imagine that this type of investment would be large enough to move the needle.  They didn't mention the size of the deal, but would it even be $10m?

 

Totally agree. These guys are really starting to worry me. SD, Blackberry, RFP. I could have thrown darts at a board and had a great deal more success than this nonsense. They need to get their eyes checked because I just can't figure out what they're seeing. Truly head scratching picks when there's so many more viable companies out there. They've sold class assets to buy what appears to be junk or small potatoes. I'd be a liar if I said they haven't lost me at this point. I keep hoping they prove me wrong and put egg on my face. So far, all they've done is take money out of my wallet.

 

A chef? Really? That's the best they could come up with? This is going from puzzling to goofy. Maybe they should look at something other than a dying or insignificant Canadian business for a change.

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Very strange.  It's hard to imagine that this type of investment would be large enough to move the needle.  They didn't mention the size of the deal, but would it even be $10m?

 

Totally agree. These guys are really starting to worry me. SD, Blackberry, RFP. I could have thrown darts at a board and had a great deal more success than this nonsense. They need to get their eyes checked because I just can't figure out what they're seeing. Truly head scratching picks when there's so many more viable companies out there. They've sold class assets to buy what appears to be junk or small potatoes. I'd be a liar if I said they haven't lost me at this point. I keep hoping they prove me wrong and put egg on my face. So far, all they've done is take money out of my wallet.

 

A chef? Really? That's the best they could come up with? This is going from puzzling to goofy. Maybe they should look at something other than a dying or insignificant Canadian business for a change.

 

You mean like the billion dollar fund they launched in India? Or the $300M investment in an Irish bank recapitalization? Or the amount that they've put to work buying real estate companies and banks in Greece? What about the acquisition of Brit or other smaller, diverse, insurance businesses? Their last foray into the food industry worked out pretty well for them, why are we giving them so much hate for this one?

 

The recent investments in Blackberry are far from settled in terms of profit potential - what I do know is that the stock has rarely traded below the price Prem doubled down at years ago prior to the CEO change and burning through billions of dollars in inventory. Seems like he did pretty well with picking a good price to double down at then. Often times, the stock has traded hefty premium to that price. Further, the convertible debt deal looks like a real winner in terms of providing $500M in well covered, high-yield debt in a low rate environment with the upside of equity in the event that software revenue does take off. That also seems pretty great.

 

I can't speak to RFP or SD, but if you put all of the money invested in these "goofy", "puzzling", "insignificant" Canadian businesses together, it still  pales in comparison to all of the money they have spent on building and diversifying their insurance business, growing their Indian investment platform, and making actual equity/debt investments statistically cheap areas so I don't understand why you're so caught up on it? It sounds like they're doing exactly what you wanted - spending the majority of their time and money on other endeavors.

 

Cheers!

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Very strange.  It's hard to imagine that this type of investment would be large enough to move the needle.  They didn't mention the size of the deal, but would it even be $10m?

 

Totally agree. These guys are really starting to worry me. SD, Blackberry, RFP. I could have thrown darts at a board and had a great deal more success than this nonsense. They need to get their eyes checked because I just can't figure out what they're seeing. Truly head scratching picks when there's so many more viable companies out there. They've sold class assets to buy what appears to be junk or small potatoes. I'd be a liar if I said they haven't lost me at this point. I keep hoping they prove me wrong and put egg on my face. So far, all they've done is take money out of my wallet.

 

A chef? Really? That's the best they could come up with? This is going from puzzling to goofy. Maybe they should look at something other than a dying or insignificant Canadian business for a change.

 

 

Not necessarily goofy, but possibly so.  My concern about this investment is the same concern that I had about Blackberry, which is position sizing.  In the case of Blackberry, I thought that FFH's position sizing was so aggressive that it was unwise and exposed the company to a material risk of a permanent loss of capital.  Now with McEwan, it's the opposite.  The position looks like it is too small to merit even 5 minutes of management's attention (that 5 minutes of attention would be better spend on Bank of Ireland or some other investment).

 

So, maybe I am a difficult shareholder, but I am puzzled by the trivial size of this investment.

 

 

SJ

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What puzzles me is that no one goes out of their way to eat at a McEwan establishment.

Bymark, North 44, etc is no French Laundry, Alinea, or The Fat Duck.

To really scale up chefs are going after the fast casual market ie- Shake Shack, bobby's Burger Palace,

I too am worried about Fairfax's emphasis in analyzing and investing in these minuscule businesses when they have bigger fish to fry.

I see a lot more of the West Coast restaurant chains( Cactus Cafe, Joey's, Earl's, Brown's Social House) muscling in on the Ontario market because they see how awful the food scene is here

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They bought the guy...Fairfax is too big to spend time on their investments in the industry. ..

 

Warren Bufffett owned and still owns many food franchises at a time he just too big to have them reported on anymore...its a good business as a franchise.

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Does anyone actually know that anyone senior spent significant time on this deal?!

 

 

No, it's all supposition that senior management invested some of their time in this.  But, to hypothesize otherwise, you must make the assumption that significant authority is delegated to middle management (which has never really been my experience).

 

In a typical organization, middle management has a range of decisions that they can take without obtaining approval.  So, for capital allocation purposes, the way you might structure portfolio decisions would be to allow Manager X to invest an aggregate amount $Y constrained by a collection of rules (ie, no single position can be larger than Z, total asset allocation must fall with the range of A%-B% equities and C%-D% fixed income, a maximum of F% from emerging markets, etc).  Minor deviations from those rules would require running a quick decision past the bosses.  Anything weird, wonderful or exotic would require a more fulsome presentation/pitch to the bosses to obtain their approval.

 

So, is an investment in McEwan just a minor deviation from authority already granted to middle management, or is it wacky enough that it required the whole enchilada?

 

This is why some of us hypothesize that the FFH C-suite must have spent at least a little bit of their valuable time on this investment.

 

 

SJ

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  • 2 weeks later...

What puzzles me is that no one goes out of their way to eat at a McEwan establishment.

Bymark, North 44, etc is no French Laundry, Alinea, or The Fat Duck.

To really scale up chefs are going after the fast casual market ie- Shake Shack, bobby's Burger Palace,

I too am worried about Fairfax's emphasis in analyzing and investing in these minuscule businesses when they have bigger fish to fry.

I see a lot more of the West Coast restaurant chains( Cactus Cafe, Joey's, Earl's, Brown's Social House) muscling in on the Ontario market because they see how awful the food scene is here

 

We ate a Cactus Cafe on a recent trip to Kelowna. Food was great, atmosphere great and the waitresses were even better. They know how to hire.

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