Fairfax stock positions

[SafetyinNumbers]

7 minutes ago, Hoodlum said:

Thanks. That makes sense regarding the management ownership. I have also updated my comments, removing references to Bauer as this was a Peak acquisition.  This acquisition places a value of $650m on Fairfax’s 85% ownership of Peak.  I can see this becoming another $1B business for Fairfax in the not too distant future. Meanwhile, this is just another footnote, that most investors are not aware of. 
 

I decided go back and look at the Peak investment in Rawlings, since most of the Peak discussion has revolved around Bauer.  Rawlings was purchased by Seidler Equity Partners for $400m in 2018.  Peak then merged Easton into Rawlings with Seidler Equity in 2020, receiving $60m in cash and a 28% equity in Rawlings. 
 

So what would the Rawlings portion of Peak be worth today. We have seen from CCM and Bauer, that Sports equipment investments have grown quite well over the last few years.  That $400m initial value for Rawlings has grown substantially since then, especially when you account for the additional size increase from the merger with Easton. Rawlings has since acquired additional baseball equipment companies since then and moved to a new Campus in 2022. 
 

It is difficult to determine a value for Rawlings since they are privately owned, but I could see a valuation in access of $1B based on what we now.  That would suggest Peak’s 28% interest in Rawlings being valued at over $300m.  
 

I believe that Peak is still undervalued at $650m based on what we can ascertain. 
 

 

As you pointed out in the first post, didn’t Peak sell its stake in Rawlings and then payout a special dividend? 

[Hoodlum]

10 minutes ago, SafetyinNumbers said:

As you pointed out in the first post, didn’t Peak sell its stake in Rawlings and then payout a special dividend? 

I had not realized that dividend was related to a sale. I will delete this latest post to avoid confusion with others.  That does seem like a very low valuation for Rawlings. 

[Hoodlum]

Fairfax is involved in another Convertible Notes placement for Orla Mining, related to the acquisition of an Ontario gold mine.

 

https://www.newswire.ca/news-releases/orla-mining-announces-strategic-expansion-into-canada-with-acquisition-of-the-musselwhite-gold-mine-817471626.html

 

Quote

In connection with the Transaction, Orla has entered into a commitment letter with Fairfax, Pierre Lassonde, and Trinity Capital Partners Corporation for a non-brokered private placement of Convertible Notes in an aggregate principal amount of $200 million (the "Private Placement"). The Convertible Notes will have the following terms:

• Interest Rate: 4.5% per annum, payable in cash.
   
• Maturity: Five years from the date of issuance.
   
• Conversion Right: The Convertible Notes may be converted in full or in part at any time prior to the maturity date, by the holder thereof, into common shares (the "Shares") of Orla.
   
• Conversion Price: The initial conversion price for the Convertible Notes will be CAD$7.90 per Share (the "Conversion Price"). The Conversion Price represents a premium of 42% relative to closing price of Shares on Friday November 15, 2024 and will be subject to standard anti-dilution adjustments. 
   
• Redemption Right: After the 18-month anniversary of the issuance, the Company may redeem the Convertible Notes, provided that the 20-day volume weighted average price of the Shares is not less than 130% of the Conversion Price. Upon redemption, the Convertible Notes will convert into Shares at the Conversion Price.
   
• Warrants: On closing, each holder of the Convertible Notes will receive, for each Share issuable upon conversion thereof, 0.66 common share purchase warrants (the "Warrants") to acquire Shares. The Warrants shall have an exercise price of CAD$11.50 per Share and shall expire on the fifth anniversary of the closing of the Private Placement. 

 

[nwoodman]

Short video of Fokion Karavias discussing the fortunate problem of excess capital.  He reiterates comments from the Q3 results i.e. payout ratio raised to 50%. M&A is still on the cards but looking east (Middle East and India).   Also discusses  their plans to leverage their strong presence in Greece and Cyprus  to act as a gateway for corporates from the ME/I to the EU.

 

https://www.bloomberg.com/news/videos/2024-11-18/banks-in-greece-have-excess-capital-eurobank-ceo-says-video

[nwoodman]

Some coverage on the debt raise for Sleep Country

 

Sleep Country Canada Holdings Inc. is talking to investors about a potential Canadian-dollar bond sale to help finance its C$1.7 billion acquisition by Fairfax Financial Holdings Ltd. in what would be a rare leveraged buyout funded by loonie-denominated bonds, according to a person with knowledge of the matter.

The Canadian mattress retailer is holding a call for fixed-income investors on Wednesday, organized by National Bank Financial Markets and Scotia Capital, Bloomberg reported earlier. The company is expected to receive at least one credit rating that's below investment grade, according to the person, who asked not to be identified discussing private matters.

 

 

https://www.bloomberg.com/news/articles/2024-11-19/sleep-country-mulls-potential-bond-sale-in-rare-leveraged-buyout?srnd=phx-markets

Edited November 20, 2024 by nwoodman

[Hoodlum]

AGT announced the sale of their rail assets to GCMG, while signing a 20 year agreement to continue using this rail system.  There are no details of the sale value, but GCMG will need to report it at the time it closes in the next couple of months. 
 

I wonder what AGT has planned for this, unless they will distribute a special dividend to Fairfax. 

 

https://www.globenewswire.com/news-release/2024/11/20/2984466/0/en/AGT-Food-and-Ingredients-Inc-Announces-Sale-of-Shortline-Rail-and-Bulk-Handling-Infrastructure-Partnership-with-GCM-Grosvenor-and-Mobil-Grain-Ltd.html

 

This sale returns significant capital to AGT, which presently generates over $3 billion in revenue annually. We will continue building on the strength of our partnership with Fairfax Financial Holdings Ltd. in creating a global agriculture growth story, including expanding our global packaged foods business.
 

The transaction is subject to regulatory approvals and customary closing conditions and is expected to close in late 2024 or early 2025.

[Viking]

3 hours ago, Hoodlum said:

AGT announced the sale of their rail assets to GCMG, while signing a 20 year agreement to continue using this rail system.  There are no details of the sale value, but GCMG will need to report it at the time it closes in the next couple of months. 
 

I wonder what AGT has planned for this, unless they will distribute a special dividend to Fairfax. 

 

https://www.globenewswire.com/news-release/2024/11/20/2984466/0/en/AGT-Food-and-Ingredients-Inc-Announces-Sale-of-Shortline-Rail-and-Bulk-Handling-Infrastructure-Partnership-with-GCM-Grosvenor-and-Mobil-Grain-Ltd.html

 

This sale returns significant capital to AGT, which presently generates over $3 billion in revenue annually. We will continue building on the strength of our partnership with Fairfax Financial Holdings Ltd. in creating a global agriculture growth story, including expanding our global packaged foods business.
 

The transaction is subject to regulatory approvals and customary closing conditions and is expected to close in late 2024 or early 2025.

 

@Hoodlum , thanks for posting the link. This is the part that really got my attention "This sale returns significant capital to AGT." 

 

Fairfax took AGT private in 2018. The total company back then was valued at C$436 million. AGT is a large company.

 

Over the years, we have received very little new information on what has been happening at this company - and what its value is today. 

 

It makes sense that Fairfax does want to get paid for its significant investment in AGT. Perhaps we see a nice dividend get to sent to Fairfax when this deal closes.

-----------

Welcome to 'new Fairfax'. 6 years ago many of the equity holdings were burning cash (at the Fairfax level) and the time of Fairfax's senior management team. 6 years later, after much creativity and effort, Fairfax's equity portfolio has been fixed. New equity purchases since 2018 have been very good (like Stelco). The old portfolio of holdings (from pre-2018) has been completely cleaned up. There will always be a few sub-performers in any equity portfolio - these types of holdings are now de-minimus for Fairfax. This is very bullish for future returns at Fairfax from its equity portfolio (future returns should be much better than past returns).

 

AGT is an example of a legacy company (pre-2018) that Fairfax decided to keep. It will be interesting to learn more about the transaction announced yesterday. After 6 years of ownership, it is likely a good time for Fairfax (and its shareholders) to start to get paid.

 

When you look at Fairfax's current stable of equity holdings... the 'surprises' we are getting are mostly skewed in one direction - we are getting 'good' surprises. Like I said, welcome to 'new Fairfax.' 

Edited November 20, 2024 by Viking

[Hoodlum]

51 minutes ago, Viking said:

 

@Hoodlum , thanks for posting the link. This is the part that really got my attention "This sale returns significant capital to AGT." 

 

Fairfax took AGT private in 2018. The total company back then was valued at C$436 million. AGT is a large company.

 

Over the years, we have received very little new information on what has been happening at this company - and what its value is today. 

 

It makes sense that Fairfax does want to get paid for its significant investment in AGT. Perhaps we see a nice dividend get to sent to Fairfax when this deal closes.

-----------

Welcome to 'new Fairfax'. 6 years ago many of the equity holdings were burning cash (at the Fairfax level) and the time of Fairfax's senior management team. 6 years later, after much creativity and effort, Fairfax's equity portfolio has been fixed. New equity purchases since 2018 have been very good (like Stelco). The old portfolio of holdings (from pre-2018) has been completely cleaned up. There will always be a few sub-performers in any equity portfolio - these types of holdings are now de-minimus for Fairfax. This is very bullish for future returns at Fairfax from its equity portfolio (future returns should be much better than past returns).

 

AGT is an example of a legacy company (pre-2018) that Fairfax decided to keep. It will be interesting to learn more about the transaction announced yesterday. After 6 years of ownership, it is likely a good time for Fairfax (and its shareholders) to start to get paid.

 

When you look at Fairfax's current stable of equity holdings... the 'surprises' we are getting are mostly skewed in one direction - we are getting 'good' surprises. Like I said, welcome to 'new Fairfax.' 

 

yes, I also noticed the comment regarding AGT having over $3B in revenue.  It will be interesting to see what the return on this sale is and what they do with it.

[glider3834]

4 hours ago, Viking said:

 

@Hoodlum , thanks for posting the link. This is the part that really got my attention "This sale returns significant capital to AGT." 

 

Fairfax took AGT private in 2018. The total company back then was valued at C$436 million. AGT is a large company.

 

Over the years, we have received very little new information on what has been happening at this company - and what its value is today. 

 

It makes sense that Fairfax does want to get paid for its significant investment in AGT. Perhaps we see a nice dividend get to sent to Fairfax when this deal closes.

-----------

Welcome to 'new Fairfax'. 6 years ago many of the equity holdings were burning cash (at the Fairfax level) and the time of Fairfax's senior management team. 6 years later, after much creativity and effort, Fairfax's equity portfolio has been fixed. New equity purchases since 2018 have been very good (like Stelco). The old portfolio of holdings (from pre-2018) has been completely cleaned up. There will always be a few sub-performers in any equity portfolio - these types of holdings are now de-minimus for Fairfax. This is very bullish for future returns at Fairfax from its equity portfolio (future returns should be much better than past returns).

 

AGT is an example of a legacy company (pre-2018) that Fairfax decided to keep. It will be interesting to learn more about the transaction announced yesterday. After 6 years of ownership, it is likely a good time for Fairfax (and its shareholders) to start to get paid.

 

When you look at Fairfax's current stable of equity holdings... the 'surprises' we are getting are mostly skewed in one direction - we are getting 'good' surprises. Like I said, welcome to 'new Fairfax.' 

I noticed this line in the AR which possibly relates to this

 

[Viking]

1 hour ago, glider3834 said:

I noticed this line in the AR which possibly relates to this

 

 

@glider3834 , thanks for bringing this forward. So we probably can roughly calculate Fairfax's carrying value at Dec 31, 2024 as;

• 2023 EBITDA = C$160 million = US$115 million
• Enterprise value = 6 x $115  = $691 million
• My guess is enterprise value includes debt.
• Do I need to net debt out before calculating an estimate for Fairfax's carrying value?

Edited November 21, 2024 by Viking

[glider3834]

42 minutes ago, Viking said:

 

@glider3834 , thanks for bringing this forward. So we probably can roughly calculate Fairfax's carrying value at Dec 31, 2024 as;

• 2023 EBITDA = C$160 million = US$115 million
• Enterprise value = 6 x $115  = $691 million
• My guess is enterprise value includes debt.
• Do I need to net debt out before calculating an estimate for Fairfax's carrying value?

viking assuming no changes since Dec-23, I suspect Fairfax may be carrying their AGT equity interest at nil - see Odyssey AR 2023 below 

 

 

 

[TwoCitiesCapital]

1 hour ago, Viking said:

 

@glider3834 , thanks for bringing this forward. So we probably can roughly calculate Fairfax's carrying value at Dec 31, 2024 as;

• 2023 EBITDA = C$160 million = US$115 million
• Enterprise value = 6 x $115  = $691 million
• My guess is enterprise value includes debt.
• Do I need to net debt out before calculating an estimate for Fairfax's carrying value?

 

EV does include debt - so backing out the debt gives you the equity valuation less cash. 

 

But what's confusing is that shouldn't this be equity accounted since they own more than 50%? That would be purchase price less dividends? 

[dartmonkey]

1 hour ago, TwoCitiesCapital said:

EV does include debt - so backing out the debt gives you the equity valuation less cash. 

 

But what's confusing is that shouldn't this be equity accounted since they own more than 50%? That would be purchase price less dividends? 

 

Yes, as you say, EV = market cap + debt - cash. If EV is US$690, and debt is $488m (according to the annual report, p. 92), then if there is no cash, that would give a market cap of $202m. Equity accounting would be logical fro a 59.6% stake but they may just be saying that the equity accounting gives a carrying value that may well be below fair value. 

[gfp]

It would be consolidated, not equity method

[gfp]

I found this in a Q3 Odyssey Re filing.  Seems possible that Fairfax increased their ownership in AGT to 65.66%.

 

 

AGT uses a lot of debt in their business and some of that debt does not show up on the consolidated financial statements because it is intercompany.  Much like NICO at Berkshire.  

("the Company" below is Odyssey.  "Holdings" is Odyssey Group Holdings)

 

Edited November 21, 2024 by gfp

[gfp]

BTW, I didn't know Fairfax owned 33% of the largest egg producer in Ukraine.

https://interfax.com/newsroom/top-stories/104051/

 

https://open4business.com.ua/en/ovostar-owners-complete-squeeze-out-and-announce-delisting/

Edited November 21, 2024 by gfp

[Viking]

4 hours ago, glider3834 said:

viking assuming no changes since Dec-23, I suspect Fairfax may be carrying their AGT equity interest at nil - see Odyssey AR 2023 below 

 

 

 

 

@glider3834 , this makes sense. When Fairfax reports their equity holdings in the AR, when they report non-insurance consolidated holdings they have a zero value for 'other'. It makes sense that is where AGT should be captured... and it looks like it is. 

 

Solves a riddle. 

 

Another question the Odyssey summary gives us is the approximate total value for Meadow Foods = $250 million (carrying value). I don't think we have ever been told how much Fairfax owns today. On the Q3 conference call, Wade Burton called out Meadow Foods as one of the large private investments over the past 2 years (along with Sleep country and Peak).

 

It's interesting... when running my numbers, the carrying value that Odyssey reports (using US GAAP) did not match up with what Fairfax reports (using IFRS 17) for lots of the holdings. But the market values kind of did match up for most holdings. Which actually makes sense.

 

[nwoodman]

1 hour ago, Viking said:

 

Another question the Odyssey summary gives us is the approximate total value for Meadow Foods = $250 million (carrying value). I don't think we have ever been told how much Fairfax owns today. On the Q3 conference call, Wade Burton called out Meadow Foods as one of the large private investments over the past 2 years (along with Sleep country and Peak).

 

 

It looks like this is disclosed on Page 6 (Note 3) of the Odyssey filing

 

 

Edit: This seems to be upstreaming, as Newline UK is a sub of Odyssey.  Quite confusing as I thought the Chandler Family and Exponent Private Equity were still participating. However if that is no longer the case maybe the 35% and the 250m give the total amount, as other Fairfax insurance subs hold the remaining 64.9%.  See Schedule Y:

Odyssey Reinsurance Company: 35.06%

Crum and Foster United States Fire Insurance Company: 12.68%

 Zenith Insurance Company: 20.30%

Federated Insurance Company of Canada: 1.01%

Northbridge General Insurance Corporation: 3.55%

Allied World Assurance Company (Europe) dac: 3.55%

Allied World Assurance Company (U.S.) Inc.: 4.06%

Allied World National Assurance Company: 7.61%

Allied World Insurance Company: 4.06%

Allied World Specialty Insurance Company: 4.06%

Allied World Surplus Lines Insurance Company: 4.06% 

Edited November 21, 2024 by nwoodman

[Viking]

12 minutes ago, nwoodman said:

It looks like this is disclosed on Page 6 (Note 3) of the Odyssey filing

 

 

Edit: This seems to be upstreaming, as Newline UK is a sub of Odyssey.  Quite confusing.

@nwoodman, my problem is i am not an accountant. So it takes me some time (and lots of questions to others on the board) to get some things figured out. But we do get there eventually. As always, thanks for the help.

[nwoodman]

28 minutes ago, Viking said:

@nwoodman, my problem is i am not an accountant. So it takes me some time (and lots of questions to others on the board) to get some things figured out. But we do get there eventually. As always, thanks for the help.

All good, I fumble around in the dark at times on these filings so see the edit above.  Can you point me in the direction of the $250m you referenced previously?

[giulio]

4 hours ago, nwoodman said:

It looks like this is disclosed on Page 6 (Note 3) of the Odyssey filing

 

 

Edit: This seems to be upstreaming, as Newline UK is a sub of Odyssey.  Quite confusing as I thought the Chandler Family and Exponent Private Equity were still participating. However if that is no longer the case maybe the 35% and the 250m give the total amount, as other Fairfax insurance subs hold the remaining 64.9%.  See Schedule Y:

Odyssey Reinsurance Company: 35.06%

Crum and Foster United States Fire Insurance Company: 12.68%

 Zenith Insurance Company: 20.30%

Federated Insurance Company of Canada: 1.01%

Northbridge General Insurance Corporation: 3.55%

Allied World Assurance Company (Europe) dac: 3.55%

Allied World Assurance Company (U.S.) Inc.: 4.06%

Allied World National Assurance Company: 7.61%

Allied World Insurance Company: 4.06%

Allied World Specialty Insurance Company: 4.06%

Allied World Surplus Lines Insurance Company: 4.06% 

I believe this does NOT refer to Fairfax ownership in the Meadow UK. FF Meadow Holdings is a sub of Fairfax, 100% owned through its various insurance companies as you listed. FF Meadow then holds a minority stake in Meadow UK, the actual company.

 

Best,

G

[nwoodman]

11 minutes ago, giulio said:

I believe this does NOT refer to Fairfax ownership in the Meadow UK. FF Meadow Holdings is a sub of Fairfax, 100% owned through its various insurance companies as you listed. FF Meadow then holds a minority stake in Meadow UK, the actual company.

 

Best,

G

Good one, happy to have some clarity on this with some filing rigour.

[Viking]

Well, at least this is good news for Recipe and their +1,000 restaurants in Canada. Does Prem have Trudeau’s ear? “The government is proposing that the GST/HST be fully and temporarily relieved on holiday essentials, like groceries, restaurant meals, drinks, snacks, children’s clothing, and gifts, from December 14, 2024, to February 15, 2025.”

 

The GST on restaurant meals in Canada is 5%. More for provinces with the HST (harmonized federal and provincial taxes). So this is a meaningful reduction.

 

- https://www.canada.ca/en/department-finance/news/2024/11/more-money-in-your-pocket-a-tax-break-for-all-canadians.html#

 

The current federal Liberal government has to be the worst federal government in Canadian history - at least in my lifetime. And we have had some bad ones. The current $250 cheque per adult + 2 month tax break (on a few things) is just the latest in their bat shit crazy management of the Canadian economy, especially over the past 6 or 7 years. I have tried to keep away from politics - but this Liberal government just keeps setting new lows. I am completely dumbfounded by what they say and do. Fortunately, Canada is less than 12 months away from a federal election - my only hope is that Trudeau stays on as leader of the Liberals. 
 

PS: My family will now be getting cheques for 5 x $250 = $1,250. Money we do not need. I suppose i should be celebrating…

Edited November 21, 2024 by Viking

[Junior R]

2 hours ago, Viking said:

Well, at least this is good news for Recipe and their +1,000 restaurants in Canada. Does Prem have Trudeau’s ear? “The government is proposing that the GST/HST be fully and temporarily relieved on holiday essentials, like groceries, restaurant meals, drinks, snacks, children’s clothing, and gifts, from December 14, 2024, to February 15, 2025.”

 

The GST on restaurant meals in Canada is 5%. More for provinces with the HST (harmonized federal and provincial taxes). So this is a meaningful reduction.

 

- https://www.canada.ca/en/department-finance/news/2024/11/more-money-in-your-pocket-a-tax-break-for-all-canadians.html#

 

The current federal Liberal government has to be the worst federal government in Canadian history - at least in my lifetime. And we have had some bad ones. The current $250 cheque per adult + 2 month tax break (on a few things) is just the latest in their bat shit crazy management of the Canadian economy, especially over the past 6 or 7 years. I have tried to keep away from politics - but this Liberal government just keeps setting new lows. I am completely dumbfounded by what they say and do. Fortunately, Canada is less than 12 months away from a federal election - my only hope is that Trudeau stays on as leader of the Liberals. 
 

PS: My family will now be getting cheques for 5 x $250 = $1,250. Money we do not need. I suppose i should be celebrating…

 

I am hoping they don't use this to sucker in NDP and pass through the capital gains tax changes in 2024 ...If they delay that and pass it in 2025 its better as tax returns for many companies and people are going be hard...6 weeks left

[glider3834]

12 hours ago, giulio said:

I believe this does NOT refer to Fairfax ownership in the Meadow UK. FF Meadow Holdings is a sub of Fairfax, 100% owned through its various insurance companies as you listed. FF Meadow then holds a minority stake in Meadow UK, the actual company.

 

Best,

G

as I understand Meadow is a consolidated sub - Fairfax (via FF Meadow Bidco) bought controlling interest in Swan Topco from Exponent and Swan Topco is the controlling shareholder of underlying Meadow Foods business