Fairfax stock positions

[nwoodman]

1 hour ago, Hoodlum said:

Fairfax sweetens the deal for IDBI Bank

 

 

USD 10.9bn and counting, OMERS will be drooling

[SafetyinNumbers]

2 hours ago, nwoodman said:

USD 10.9bn and counting, OMERS will be drooling

How does Fairfax India do this without partners and raising additional capital? Besides OMERS, I wonder where it comes from. I wonder how levered can this be at the FIH level. I assume they are looking to avoid dilution at FIH so I can’t see how they can issue equity directly. 
 

[nwoodman]

31 minutes ago, SafetyinNumbers said:

How does Fairfax India do this without partners and raising additional capital? Besides OMERS, I wonder where it comes from. I wonder how levered can this be at the FIH level. I assume they are looking to avoid dilution at FIH so I can’t see how they can issue equity directly. 
 

It’s probably worth reiterating that the Indian government is selling a 60.72% stake in IDBI Bank but it’s still a big number.  It will dwarf the likes of Atlas and Eurobank.  
 

Given enthusiasm around the Indian thesis at the moment a book build should be more straight forward than  even a couple of years ago.  While it doesn’t really sit within an Anchorage IPO surely that has to be part of the answer.  
 

Prem obviously considers this a bit of a crown jewel, personally  I find it a bit formidable. It’s going to be fascinating and I think it speaks volumes about their brand in India if they get the nod.
 

[dartmonkey]

13 hours ago, nwoodman said:

It’s probably worth reiterating that the Indian government is selling a 60.72% stake in IDBI Bank but it’s still a big number.  It will dwarf the likes of Atlas and Eurobank.  
 

Given enthusiasm around the Indian thesis at the moment a book build should be more straight forward than  even a couple of years ago.  While it doesn’t really sit within an Anchorage IPO surely that has to be part of the answer.  
 

Prem obviously considers this a bit of a crown jewel, personally  I find it a bit formidable. It’s going to be fascinating and I think it speaks volumes about their brand in India if they get the nod.
 

 

Ok, so 60.72% of INR 90438 crore would be $10.91b means this would be $6.6b if acquired with no premium. Seems like a very big fish for a minnow like Fairfax India (mkt cap $2b) to swallow, with or without the support of OMERS which would not be wanting to take on a lot of equity risk.

[nwoodman]

10 hours ago, dartmonkey said:

 

Ok, so 60.72% of INR 90438 crore would be $10.91b means this would be $6.6b if acquired with no premium. Seems like a very big fish for a minnow like Fairfax India (mkt cap $2b) to swallow, with or without the support of OMERS which would not be wanting to take on a lot of equity risk.

I see it as parlaying an airport into a bank.  Fairfax will likely do their usual debt dressed as equity but with a twist to comply with the banking regulators.  I doubt the regulators would take kindly to slicing the bank position so it is a case of what other assets they can leverage.  I doubt Fairfax think about the market cap or even book value of Fairfax India but what lien they get against the underlying assets. I also think FFH has to throw $2-3 bn into this to make it happen too.  
 

All a bit previous as there are no approvals.  Still think this has the making of minor indigestion but the balance sheet is much bigger than when this was first flagged a couple of years ago.  I can see why Prem is keen but it is like elephant hunting with a bow and arrow, you better not miss.

[petec]

13 hours ago, nwoodman said:

I see it as parlaying an airport into a bank.

 

Not sure I follow?

 

13 hours ago, nwoodman said:

Fairfax will likely do their usual debt dressed as equity but with a twist to comply with the banking regulators.

 

I assume you're referring to OMERS, but I could also see FFH doing a pref+warrant deal with FIH to get the deal done. Or maybe that is what you mean.

[nwoodman]

2 hours ago, petec said:

 

Not sure I follow?

 

 

I assume you're referring to OMERS, but I could also see FFH doing a pref+warrant deal with FIH to get the deal done. Or maybe that is what you mean.

1. The airport is the biggest and potentially undervalued asset on the FIH books.  It has to figure prominently in any capital raise for a cash purchase of IDBI but I don’t think they want to sell it completely.  
 

2. Yes OMERS is what I was referring to but they will need a substantial contribution from FFH.  Thats assuming there isn’t a “pet insurance” business lurking on the FIH balance sheet.  Warrants/Prefs makes good sense rather than equity.

 

IDBI seems to moving in the right direction from a profitability perspective but non Performing Assets were a big problem for them until recently. GNPA peaked at 28% in 2018 and is now around 4-5%. Roughly like a current Eurobank vs the 2015 version that saw NPLs peak  at 45%.

 

I am more intrigued than concerned as to how they pull it together.  Their timing was pretty good with Bank of Ireland but they were definitely early with Eurobank.  Given these experiences I am hoping their “rat sniffing” is finely tuned these days, especially in the context of banks.
 

[Hoodlum]

Farmers Edge deal will close on Thursday.

 

https://www.newswire.ca/news-releases/farmers-edge-obtains-final-court-order-approving-plan-of-arrangement-831538915.html

 

Quote

WINNIPEG, MB, March 19, 2024 /CNW/ - Farmers Edge Inc. ("Farmers Edge" or the "Company") (TSX: FDGE) today announced that it has obtained a final order of the Court of King's Bench of Manitoba approving the previously announced statutory plan of arrangement (the "Arrangement") pursuant to which 15635594 Canada Inc., a subsidiary of Fairfax Financial Holdings Limited ("FFHL") will, among other things, acquire all of the outstanding common shares of the Company (each, a "Common Share"), except for: (i) 25,718,393 Common Shares (representing approximately 61.2% of the outstanding Common Shares) held by FFHL, and its affiliates; and (ii) those Common Shares held by the Company's Chief Executive Officer; for a price of $0.35 in cash per Common Share.

 

Completion of the Arrangement remains subject to the satisfaction of certain customary closing conditions.  The Arrangement is expected to be completed on or about March 21, 2024, following which Farmers Edge will no longer be publicly held and the Common Shares will be delisted from the Toronto Stock Exchange.

 

[Viking]

2 hours ago, Hoodlum said:

Farmers Edge deal will close on Thursday.

 

https://www.newswire.ca/news-releases/farmers-edge-obtains-final-court-order-approving-plan-of-arrangement-831538915.html

One step closer to being able to (finally) close the book on this perpetual money-losing holding. It would be interesting to know what the benefits are to Fairfax of taking it private.

[Crip1]

50 minutes ago, Viking said:

One step closer to being able to (finally) close the book on this perpetual money-losing holding. It would be interesting to know what the benefits are to Fairfax of taking it private.

Part of the benefit would presumably be not having to talk about the share price any more. It's now "out of sight, out of mind" so if it does go fully belly up, it's a non issue. If, by the grace of God, somehow it starts making money, it could be sold eventually not unlike the Pet Insurance business. Improbable, but not impossible. 

 

-Crip

[Viking]

1 hour ago, Crip1 said:

Part of the benefit would presumably be not having to talk about the share price any more. It's now "out of sight, out of mind" so if it does go fully belly up, it's a non issue. If, by the grace of God, somehow it starts making money, it could be sold eventually not unlike the Pet Insurance business. Improbable, but not impossible. 

 

-Crip

 

I think in the past @glider3834 has pointed out that there may be some tax loss benefits as well. But i am not an accountant so can’t speak to those sorts of things. 

Edited March 20 by Viking

[petec]

9 hours ago, nwoodman said:

1. The airport is the biggest and potentially undervalued asset on the FIH books.  It has to figure prominently in any capital raise for a cash purchase of IDBI but I don’t think they want to sell it completely.  
 

2. Yes OMERS is what I was referring to but they will need a substantial contribution from FFH.  Thats assuming there isn’t a “pet insurance” business lurking on the FIH balance sheet.  Warrants/Prefs makes good sense rather than equity.

 

IDBI seems to moving in the right direction from a profitability perspective but non Performing Assets were a big problem for them until recently. GNPA peaked at 28% in 2018 and is now around 4-5%. Roughly like a current Eurobank vs the 2015 version that saw NPLs peak  at 45%.

 

I am more intrigued than concerned as to how they pull it together.  Their timing was pretty good with Bank of Ireland but they were definitely early with Eurobank.  Given these experiences I am hoping their “rat sniffing” is finely tuned these days, especially in the context of banks.
 

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

[nwoodman]

1 hour ago, petec said:

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

1. Agree about selling BIAL but it doesn’t mean you can’t use it as part of a financing deal and still maintain control.

2.  I think we are already seeing that hypothesis play out.

3.  Digit is the obvious answer to that last point.

 

I think this years AGM is shaping up to be a cracker.  I will be following it as best I can from the trek to Mera Peak in Nepal.  Have fun y’all

[TwoCitiesCapital]

11 hours ago, petec said:

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

 

I believe the commitment was every new, non-insurance indian investment would be done via FIH to prevent a conflict of interest in determining which shareholders get access to which deals. 

 

If FIH and FFH are both contributing proportionately due to a deal being too big for FIH, I wouldn't be upset because it doesn't upset the apple cart of favoring one group over another. 

 

If it's structured where FFH gets the bill and FIH a token amount, I think you'll see problems. 

Edited March 20 by TwoCitiesCapital

[petec]

9 hours ago, nwoodman said:

Agree about selling BIAL but it doesn’t mean you can’t use it as part of a financing deal and still maintain control.

 

I think BIAL is the *last* asset they'd sell, because it does seem clearly undervalued.

 

9 hours ago, nwoodman said:

Digit is the obvious answer to that last point.

 

No - Digit is an insurance company. They'll always be done by FFH. FIH is meant to do everything else.- I am pretty sure they laid this out on a call a year or two back. So Digit is not a proof-point, actually.

 

I'm guessing a combination of FIH equity, plus OMERS, plus FFH lending to FIH (either straight debt or pref+warrant, but the warrant would have to be designed not to f*** over FIH minorities).

 

Potentially a nice way to deploy a few billion of the fixed income portfolio at a decent spread backed by the entire FIH portfolio.

 

 

[petec]

4 minutes ago, TwoCitiesCapital said:

I believe the commitment was every new, non-insurance indian investment

 

Yes. I am sure this is how it is meant to work.

 

[Xerxes]

12 hours ago, petec said:

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

In 2018 AGM they contrasted FIH to a ship sailing independently on a discovery mission. That ship is far enough from the mainland (FFH) such that it does not cause collateral damage. 
 

Based on that I think a large bank would not go on FFH balance sheet. Unless the view above is changed. I also realize that FIH doesn’t have the firepower. 

Edited March 20 by Xerxes

[SafetyinNumbers]

44 minutes ago, Xerxes said:

In 2018 AGM they contrasted FIH to a ship sailing independently on a discovery mission. That ship is far enough from the mainland (FFH) such that it does not cause collateral damage. 
 

Based on that I think a large bank would not go on FFH balance sheet. Unless the view above is changed. I also realize that FIH doesn’t have the firepower. 

I think they could create a sidecar structure. Other asset managers use it when a particular idea or opportunity is too big for the main fund. In FIH’s case, they could contribute the CSB stake and $300m in cash or abour ~$700m in value depending on the CSB mark. The rest of the funds could be contributed by FFH and other large investors like OMERS etc… With this structure, FIH, could earn a management fee on the outside investors share of the sidecar. 
 

It makes no sense to dilute FIH equity to fund this deal or to sell a crown jewel like BIAL so I don’t think they will do that. The sidecar is a sensible solution and FIH would still have ~$5/share of exposure to banking but they might have better ideas.

[nwoodman]

1 hour ago, petec said:

 

I think BIAL is the *last* asset they'd sell, because it does seem clearly undervalued.

 

 

No - Digit is an insurance company. They'll always be done by FFH. FIH is meant to do everything else.- I am pretty sure they laid this out on a call a year or two back. So Digit is not a proof-point, actually.

 

 

I was actually referring to Digit’s float.  While relatively small, surely the appeal of an Indian P&C and Life insurer is investing in domestic assets.  I have often wondered how the investment ideas get split once Digit is large enough.  One of those nice problems to have as long as you are invested in the Parent.

[ValueMaven]

Micron up 15% in AH trading 

[Hoodlum]

32 minutes ago, ValueMaven said:

Micron up 15% in AH trading 

Someone needs to ask Prem at the AGM about Micron as an AI play. 

Edited March 20 by Hoodlum

[nwoodman]

42 minutes ago, ValueMaven said:

Micron up 15% in AH trading 

They blew thru estimates, impressive
 

Micron Q2 24 Earnings Results:
- Adj EPS: +$0.42 (est -$0.27)
- Adj Revenue: $5.82B (est $5.32B)
- Cash Flow From Ops: $1.22B (est $2.14B)
- Adj Op. Income: $504M (est -$238.4M)
- Sees Q3 Adj Revenue Between $6.4B - $6.8B (est $5.99B)

 

19 minutes ago, Hoodlum said:

Someone needs to ask Prem at the AGM about Micron as an AI play. 

“No technology investment for me!"

 

 

 

[netcash1]

as of the last filing period how much MU did Fairfax own?

[nwoodman]

13 minutes ago, netcash1 said:

as of the last filing period how much MU did Fairfax own?

This seems reasonably accurate

 

https://www.dataroma.com/m/holdings.php?m=FFH

 

 

[glider3834]

58 minutes ago, nwoodman said:

This seems reasonably accurate

 

https://www.dataroma.com/m/holdings.php?m=FFH

 

 

looks like they put most of their position on Q3'22 , Q1'23 https://www.dataroma.com/m/m_activity.php?m=FFH&typ=b 

 

not sure their avg cost but Micron was trading in a band from low 50s to low 60s - so if we assume high 50s cost & their position in MU unchanged since Q4'23, would be 2x based on AH pricing

 

 

Edited March 20 by glider3834