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Fairfax will own 38% of Imvescor Restaurant Group Inc. (TSX: IRG)


ourkid8
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Hi guys,

 

I have not seen this posted yet but here is another restaurant Fairfax is adding to their collection.  I have not eaten at Pizza Delight but I have been to Baton Rouge which is a nice chain!

 

http://www.winnipegfreepress.com/business/breakingnews/new-brunswicks-imvescor-restaurant-group-finishes-25-million-in-refinancing-136389383.html

 

TORONTO - Imvescor Restaurant Group Inc. (TSX: IRG), owner of the Pizza Delight and Baton Rouge chains, has closed a $25-million refinancing that leaves Canadian insurance giant Fairfax Financial Holdings owning more than a third of the company.

Included in the funding was $13.2 million from Fairfax (TSX:FFH), Imvescor said Thursday.

As a result, Fairfax will own and control more than 22 million Imvescor common shares, representing almost 38 per cent of the company.

New Brunswick-based Imvescor said the refinancing will position the company for a return to long-term growth.

"The transactions closed today will greatly contribute to position the company for a return to long-term growth and profitability and provide us with a significantly improved balance sheet and financial position" chief executive Denis Richard said in a news release.

Imvescor Restaurant Group owns franchised and corporate stores throughout Canada under four brands: Pizza Delight, primarily in Atlantic Canada; Mikes and Scores restaurants, primarily in Quebec, and Baton Rouge, which operates in Quebec, Ontario and Alberta.

Fairfax recently outbid the owner of Swiss Chalet to buy the food services company behind East Side Mario's and Casey's restaurants.

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I am trying to understand this unusual interest in restaurants on behalf of Fairfax. Typically restaurants are subject to a lot of competition, high cap ex, small margins, and at the mercy of the macro economy. The degree of profitability is usually dependent on the ability of management and so the jockey seems to be very important in these types of businesses.  Seems like a high hurdle to climb.

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I am trying to understand this unusual interest in restaurants on behalf of Fairfax. Typically restaurants are subject to a lot of competition, high cap ex, small margins, and at the mercy of the macro economy. The degree of profitability is usually dependent on the ability of management and so the jockey seems to be very important in these types of businesses.  Seems like a high hurdle to climb.

 

I'm kind of wondering the same thing. I tend to prefer the kind of companies that Markel Ventures has been investing in (very niche manufacturers, mostly). But I trust that the FFH people have done their due diligence..

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There's an enormous difference between owning a restaurant chain and the franchisor of a restaurant chain. Franchising can be, and often is, a wonderful business.

 

From Imvescors prospectus for the rights offering, 249 out of 253 restaurants are franchises. For Prime that number is 143 out of 154.

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I like the Imvescor deal, it's a Graham's cigar-butt style stock -- just plain cheap.

The share price has declined dramatically in the last year

from $ 3.01 (Feb. 4, 2011) to a low of  $ 0.20  (Oct. 7, 2011).

 

Market cap - only 7.08M*

Total shareholders' equity:  37.37M* (as of 3rd qtr. -  Jul 31, 2011)

 

so only about 1/5 of book value, the current market cap

 

*source:

http://www.theglobeandmail.com/globe-investor/markets/stocks/financials/?q=IRG-T&page=balanceSheet&frequency=QUARTERLY#financials-content

 

I just went in a fast overfly for about 5 minutes, through some of the SEADR filings. I just wonder that i can't find any more recent balance sheet data of the fiscal full year. I just hope that i haven't wrongly stated the equity of about 37.37M (July 31, 2011).

 

http://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00029036

 

Now, I must add to my prior sentence, that this refinancing and recapitalization transaction throws baloney the last available quarterly report (as of July 31, 2011) with the stated equity and outstanding shares count. As it seems that these numbers should be significantly different.

 

But it still seems that they probably got some favorable valued assets with the deal after the finished refinancing and recapitalization.

 

 

 

 

 

Imvescor Restaurant Group TSX

IRG-T

 

1 year chart

http://img838.imageshack.us/img838/518/imvescor.png

 

5 days chart

http://img217.imageshack.us/img217/3179/imvescor1.png

 

<snip>...

 

Under a previously announced agreement, Fairfax has agreed to pay 56 cents per Imvescor share for the stock that's not acquired under the rights issue before it expires Thursday.     ...<snip>

 

source:

http://www.innisfailprovince.ca/article/GB/20111228/CP07/312289944/-1/inn0806/clarke-increases-stake-in-imvescor-restaurant-business-to-118&template=cpArt

 

 

---------------------------------------------------------------------------------------

 

Here are two more articles about the Imvescor deal:

 

 

Imvescor announces closing of Refinancing Transactions

29. December 2011

http://www.newswire.ca/en/story/900651/imvescor-announces-closing-of-refinancing-transactions

 

Imvescor Restaurant Group announces refinancing and recapitalization transactions

14. October 2011

http://www.newswire.ca/fr/story/859259/imvescor-restaurant-group-announces-refinancing-and-recapitalization-transactions

 

---------------------------------------------------------------------------------------

 

SEDAR filings:

 

http://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00029036

 

---------------------------------------------------------------------------------------

 

 

 

Imvescor Restaurant Group Inc.

http://www.imvescor.ca/

 

----------

 

more information about the Imvescor Restaurant brands:

 

Pizza Delight

http://www.pizzadelight.com/

 

Mikes

http://www.mikes.ca/

 

Scores

http://www.scores.ca/

 

Bâton Rouge

http://www.batonrougerestaurants.com/

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If FFH is going to follow BRK down the path of purchasing of entire companies - something I fully approve of - I would prefer they also follow WEB's example and buy quality companies in essential industries, not cigar butts. Cigar butts are okay for the equity portion of the portfolio but the emphasis should be on quality if we are buying the whole company......

 

cheers

Zorro

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Would you guys agree that both IRG and EAT are good operators but crappy capital operators... Maybe FFH is betting that by bringing financial discipline they could get a good return on their money?

 

BeerBaron

 

Thus turning them into FFH's version of SEE's? Interesting if they can do it, but the restaurant industry is more economically sensitive than a SEE's. I find it strange that they hedge their equity portfolio for a major correction and then invest in such an economically sensitive industry.

 

cheers

Zorro

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Would you guys agree that both IRG and EAT are good operators but crappy capital operators... Maybe FFH is betting that by bringing financial discipline they could get a good return on their money?

 

BeerBaron

 

I find it strange that they hedge their equity portfolio for a major correction and then invest in such an economically sensitive industry.

 

cheers

Zorro

 

well, in general stock prices are much more volatile than the underlying performance of the businesses, often for long periods of time. even more so in a secular regime change from bull market optimism apex to bear market pesssimism nadir, which is what ffh has been hedging against in its stock holdings.

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  • 8 months later...

 

Fairfax Announces Acquisition of Additional Imvescor Shares

Sep. 20, 2012 - Fairfax Press Release

 

http://www.fairfax.ca/news/press-releases/press-release-details/2012/Fairfax-Announces-Acquisition-of-Additional-Imvescor-Shares1131140/default.aspx

Fairfax Financial Holdings Limited ("Fairfax") (TSX:FFH)(TSX:FFH.U) announced today that it has acquired directly or through its subsidiaries 2,500,000 common shares of Imvescor Restaurant Group Inc. (TSX:IRG) ("Imvescor") at a price of $0.85 per share, bringing its total holdings in Imvescor to 8,199,309 shares or approximately 19.5% of the total common shares outstanding. Assuming full exercise of the common share purchase warrants of Imvescor held by Fairfax and no other warrants are exercised, Fairfax's ownership would be 24,533,309 shares or approximately 42.1% of the total common shares outstanding. The shares were purchased by private agreement for investment purposes pursuant to the private agreement exemption of applicable securities laws. Fairfax continually reviews its investment alternatives and may purchase additional securities of Imvescor from time to time in accordance with applicable laws.

 

 

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There's an enormous difference between owning a restaurant chain and the franchisor of a restaurant chain. Franchising can be, and often is, a wonderful business.

 

From Imvescors prospectus for the rights offering, 249 out of 253 restaurants are franchises. For Prime that number is 143 out of 154.

 

I completely agree.

A small acquisition, but imho a good one!

 

giofranchi

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There's an enormous difference between owning a restaurant chain and the franchisor of a restaurant chain. Franchising can be, and often is, a wonderful business.

 

From Imvescors prospectus for the rights offering, 249 out of 253 restaurants are franchises. For Prime that number is 143 out of 154.

 

 

Being a franchisor is all about marketing (to customers and potential franchisees). If you are good at that, you can grow, and then you are just a royalty collecting, cash-machine.

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