Jump to content

Fairfax Announces Acquisition of Additional Imvescor Shares


racemize
 Share

Recommended Posts

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

Link to comment
Share on other sites

IMO, these little acquisitions are a waste of FFHs resources.  This thing is never going to move the needle at FFH.  I would like to see them do something significant in terms of buying a whole business.

 

My feeling is they are too cheap to pay for something worthwhile. 

 

They would have to pay up for a really good franchise like Jean Coutu, Shoppers Drug Mart, or Tim Hortons.  I dont think its in the DNA.

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

Uccmal,

actually I was born in Canada, in Kitchener-Waterloo, and have the Canadian Passport!! Ahahahahahahah!! ;D

But I admit I have never eaten in an Imvescor restaurant… are they really that bad?!?! :o

Anyway, I was just talking about the fast-food franchise business in general. Which I like.

 

giofranchi

 

Link to comment
Share on other sites

IMO, these little acquisitions are a waste of FFHs resources.  This thing is never going to move the needle at FFH.  I would like to see them do something significant in terms of buying a whole business.

 

My feeling is they are too cheap to pay for something worthwhile. 

 

They would have to pay up for a really good franchise like Jean Coutu, Shoppers Drug Mart, or Tim Hortons.  I dont think its in the DNA.

 

I agree 100%. And, although DNA can play a role, I think in investing we also can go on adapting and learning and improving. Even outstanding investors like the ones at the HWIC. Let’s hope they take heed of your advice!

 

giofranchi

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

 

While there's room to debate whether the restaurants are shitholes or not, it's absolutely clear that the industry is a shit-industry.  There are thousands of participants, extremely low barriers to entry and cut-throat competition.  These chain restaurants continuously face pressure on their margins from every little immigrant-run eatery that pops up.  While there may be room for both the chains and the immigrant restaurants, clearly this is a shitty place to try to make good money.  But, I guess that's consistent with FFH's primary business of P&C insurance, which is also a highly competitive (shitty!) industry where there's little potential to build a moat.

 

 

SJ

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

 

While there's room to debate whether the restaurants are shitholes or not, it's absolutely clear that the industry is a shit-industry.  There are thousands of participants, extremely low barriers to entry and cut-throat competition.  These chain restaurants continuously face pressure on their margins from every little immigrant-run eatery that pops up.  While there may be room for both the chains and the immigrant restaurants, clearly this is a shitty place to try to make good money.  But, I guess that's consistent with FFH's primary business of P&C insurance, which is also a highly competitive (shitty!) industry where there's little potential to build a moat.

 

 

SJ

 

As far as I know, the top 25% of restaurant chains returned 279% from 2001 to 2011. The median of restaurant chains returned 113%. The S&P500 returned 33%.

“The most valuable business in the world are brand royalty businesses that can grow without capital investment” Bill Ackman on the new Burger King franchise business model.

Maybe, Imvescor is not the case, but surely there are some fast-food restaurant chains that are valuable businesses!

 

giofranchi

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

 

While there's room to debate whether the restaurants are shitholes or not, it's absolutely clear that the industry is a shit-industry.  There are thousands of participants, extremely low barriers to entry and cut-throat competition.  These chain restaurants continuously face pressure on their margins from every little immigrant-run eatery that pops up.  While there may be room for both the chains and the immigrant restaurants, clearly this is a shitty place to try to make good money.  But, I guess that's consistent with FFH's primary business of P&C insurance, which is also a highly competitive (shitty!) industry where there's little potential to build a moat.

 

 

SJ

 

As far as I know, the top 25% of restaurant chains returned 279% from 2001 to 2011. The median of restaurant chains returned 113%. The S&P500 returned 33%.

“The most valuable business in the world are brand royalty businesses that can grow without capital investment” Bill Ackman on the new Burger King franchise business model.

Maybe, Imvescor is not the case, but surely there are some fast-food restaurant chains that are valuable businesses!

 

giofranchi

 

I agree.  Owning and operating restaurants is rarely a good returning business unless the food is great or the location is very desirable.  However, a franchising business can be very profitable if the operation is good enough to be attractive to increasing numbers of franchisees.

Link to comment
Share on other sites

Gio, how did that happen?  I was born in Montreal when my dad was at Mcgill.

 

Anyway:

 

Buffett buys Nebraska furniture Mart; Ffh buys the Brick - out of near bankruptsy

 

Buff. buys Dairy Queen - FFh buys Pizza Delite

 

Buff. buys IBM - FFh buys Dell

 

Buffett avoids base commodities - FFH buys FBK

 

Buffett buys WPO - FFh buys Canwest Global and loses 500 m.

 

 

 

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

 

While there's room to debate whether the restaurants are shitholes or not, it's absolutely clear that the industry is a shit-industry.  There are thousands of participants, extremely low barriers to entry and cut-throat competition.  These chain restaurants continuously face pressure on their margins from every little immigrant-run eatery that pops up.  While there may be room for both the chains and the immigrant restaurants, clearly this is a shitty place to try to make good money.  But, I guess that's consistent with FFH's primary business of P&C insurance, which is also a highly competitive (shitty!) industry where there's little potential to build a moat.

 

 

SJ

 

As far as I know, the top 25% of restaurant chains returned 279% from 2001 to 2011. The median of restaurant chains returned 113%. The S&P500 returned 33%.

“The most valuable business in the world are brand royalty businesses that can grow without capital investment” Bill Ackman on the new Burger King franchise business model.

Maybe, Imvescor is not the case, but surely there are some fast-food restaurant chains that are valuable businesses!

 

giofranchi

 

Oh for sure!  The restaurant business is a great business to buy into if you can find quality chains at distressed prices.  Steak'n Shake was an amazing find and turn around.  A restaurant chain I would have loved to see Fairfax buy before they sold their underperforming Golden Corral unit was Frisch's.  Frisch's has somewhat saturated their market, but they are well known and faithfully busy.  You wouldn't be able to expand the franchise significantly but its burger business is a cash cow.  They sold the Golden Corral chain for $50M and paid out a $9.50 dividend to shareholders.  Someone could have bought this chain at about $18-19 share, did the same thing making back $50M, and then just held on to the the burger business.  Nope, no one bought it!  Cheers!

Link to comment
Share on other sites

Gio, how did that happen?  I was born in Montreal when my dad was at Mcgill.

 

 

Both my parents studied and received a Ph.D. in Civil Engineering at the University of Waterloo, and I was born there! I have been raised in Italy, but I travelled back to Waterloo many times and I love Canada!

 

“Born in Ontario”

Neil Young & Crazy Horse

 

;D ;D ;D

 

giofranchi

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

 

While there's room to debate whether the restaurants are shitholes or not, it's absolutely clear that the industry is a shit-industry.  There are thousands of participants, extremely low barriers to entry and cut-throat competition.  These chain restaurants continuously face pressure on their margins from every little immigrant-run eatery that pops up.  While there may be room for both the chains and the immigrant restaurants, clearly this is a shitty place to try to make good money.  But, I guess that's consistent with FFH's primary business of P&C insurance, which is also a highly competitive (shitty!) industry where there's little potential to build a moat.

 

 

SJ

 

As far as I know, the top 25% of restaurant chains returned 279% from 2001 to 2011. The median of restaurant chains returned 113%. The S&P500 returned 33%.

“The most valuable business in the world are brand royalty businesses that can grow without capital investment” Bill Ackman on the new Burger King franchise business model.

Maybe, Imvescor is not the case, but surely there are some fast-food restaurant chains that are valuable businesses!

 

giofranchi

 

 

Yep, that's all true.  We call that a "survivor's bias."  MCD has done wonderfully well, and some others have done wonderfully well.  But Pizza Delight is a third-rate (fourth-rate) regional POS in the absolutely worst segment of the restaurant industry, without the scale to be the exceptional success of THI or MCD.  Branding and loyalty are of value, but smaller players struggle to get that, especially with undifferentiated products like pizza.

 

Just ask the franchisees of Dunkin Donut in Canada...or the Outback Steakhouse in Canada...or the Olive Garden in Canada.  Or any number of failed quick service or restaurant chains.  The industry sucks, even if there are a small number of long-term successful participants.  Hussein Muhammed Ali who immigrated from Lebanon or Giorgios Giovakis who immigrated from Greece can almost always undercut them on price.

 

 

SJ

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

 

While there's room to debate whether the restaurants are shitholes or not, it's absolutely clear that the industry is a shit-industry.  There are thousands of participants, extremely low barriers to entry and cut-throat competition.  These chain restaurants continuously face pressure on their margins from every little immigrant-run eatery that pops up.  While there may be room for both the chains and the immigrant restaurants, clearly this is a shitty place to try to make good money.  But, I guess that's consistent with FFH's primary business of P&C insurance, which is also a highly competitive (shitty!) industry where there's little potential to build a moat.

 

 

SJ

 

As far as I know, the top 25% of restaurant chains returned 279% from 2001 to 2011. The median of restaurant chains returned 113%. The S&P500 returned 33%.

“The most valuable business in the world are brand royalty businesses that can grow without capital investment” Bill Ackman on the new Burger King franchise business model.

Maybe, Imvescor is not the case, but surely there are some fast-food restaurant chains that are valuable businesses!

 

giofranchi

 

 

Yep, that's all true.  We call that a "survivor's bias."  MCD has done wonderfully well, and some others have done wonderfully well.  But Pizza Delight is a third-rate (fourth-rate) regional POS in the absolutely worst segment of the restaurant industry, without the scale to be the exceptional success of THI or MCD.  Branding and loyalty are of value, but smaller players struggle to get that, especially with undifferentiated products like pizza.

 

Just ask the franchisees of Dunkin Donut in Canada...or the Outback Steakhouse in Canada...or the Olive Garden in Canada.  Or any number of failed quick service or restaurant chains.  The industry sucks, even if there are a small number of long-term successful participants.  Hussein Muhammed Ali who immigrated from Lebanon or Giorgios Giovakis who immigrated from Greece can almost always undercut them on price.

 

 

SJ

 

StubbleJumper,

I just compared an Index, which returned 113%, to another Index which returned 33%. Both are subject to the "survivor's bias", right?

My point is simply that to be a franchisee is tough: you must compete with Hussein Muhammed Ali and Giorgios Giovakis...

But to be the franchisor might be really profitable.

Anyway, I understand your point: not all franchisor are profitable, because competition is fierce, and so you have to offer high quality producs. Products that unfortunately Imvescor might lack!

 

giofranchi

Link to comment
Share on other sites

Gio, Never been to Canada eh, These are the shitholes of Canadian food places, excepting perhaps Baton Rouge.  Pizza Delight operates in small towns everywhere so I guess it has something of a moat where others refuse to operate due to scale.  Tell you though: I wont eat there if you pay for me.  :-).

 

 

While there's room to debate whether the restaurants are shitholes or not, it's absolutely clear that the industry is a shit-industry.  There are thousands of participants, extremely low barriers to entry and cut-throat competition.  These chain restaurants continuously face pressure on their margins from every little immigrant-run eatery that pops up.  While there may be room for both the chains and the immigrant restaurants, clearly this is a shitty place to try to make good money.  But, I guess that's consistent with FFH's primary business of P&C insurance, which is also a highly competitive (shitty!) industry where there's little potential to build a moat.

 

 

SJ

 

As far as I know, the top 25% of restaurant chains returned 279% from 2001 to 2011. The median of restaurant chains returned 113%. The S&P500 returned 33%.

“The most valuable business in the world are brand royalty businesses that can grow without capital investment” Bill Ackman on the new Burger King franchise business model.

Maybe, Imvescor is not the case, but surely there are some fast-food restaurant chains that are valuable businesses!

 

giofranchi

 

 

Yep, that's all true.  We call that a "survivor's bias."  MCD has done wonderfully well, and some others have done wonderfully well.  But Pizza Delight is a third-rate (fourth-rate) regional POS in the absolutely worst segment of the restaurant industry, without the scale to be the exceptional success of THI or MCD.  Branding and loyalty are of value, but smaller players struggle to get that, especially with undifferentiated products like pizza.

 

Just ask the franchisees of Dunkin Donut in Canada...or the Outback Steakhouse in Canada...or the Olive Garden in Canada.  Or any number of failed quick service or restaurant chains.  The industry sucks, even if there are a small number of long-term successful participants.  Hussein Muhammed Ali who immigrated from Lebanon or Giorgios Giovakis who immigrated from Greece can almost always undercut them on price.

 

 

SJ

 

StubbleJumper,

I just compared an Index, which returned 113%, to another Index which returned 33%. Both are subject to the "survivor's bias", right?

My point is simply that to be a franchisee is tough: you must compete with Hussein Muhammed Ali and Giorgios Giovakis...

But to be the franchisor might be really profitable.

Anyway, I understand your point: not all franchisor are profitable, because competition is fierce, and so you have to offer high quality producs. Products that unfortunately Imvescor might lack!

 

giofranchi

 

The survivor bias comes in because your index covers the top 25% of restaurants which is basically MCD, YUM and THI (in Canada) and that's nicely stable.  But IMO, there's absolute CHAOS in the bottom 75% with ridiculous levels of entry and exit, which is unlikely to be the case with the other industries to which the comparison is being made.

Link to comment
Share on other sites

The survivor bias comes in because your index covers the top 25% of restaurants which is basically MCD, YUM and THI (in Canada) and that's nicely stable.  But IMO, there's absolute CHAOS in the bottom 75% with ridiculous levels of entry and exit, which is unlikely to be the case with the other industries to which the comparison is being made.

 

Well, the top 25% returned 279%, but let's just disregard it! The median of restaurant franchisors returned 113%. Why shouldn't the median be compared to the S&P500? If you cannot compare the median of an industry to the S&P500, how could you compare the industry to the overall market?

 

giofranchi

Link to comment
Share on other sites

Well, imvescor has not had even a median peformance.  They have just required a recap. 

 

Its a very tough space in Canada.  THI owns some 50% of ALL,restaurant meals, in the space that Mikes subs and Pizza Delite operate in.  The remainder is carved up between MCD, Wendys, Harveys/second cup/ sbux/ subway, pizza-pizza, Quiznos, Yum, and lesser entities.  In the Baton Rouge segment is Jack Astors, Kelseys, Montanas, East Side Marios, Shoeless Joes, Firkin pubs, to name but a few.  At the same time some US firms are setting up shop, rather aggressively in Canada. 

 

FFH needs to grow up and buy profitable businesses at reasonable prices, with scale, that can add immediately to cash flow, rather than requiring a turn around, or dubious expansion.

 

There are alot of things I like about FFH.  There taste in non-insurance buinesses, as long term investments, is not one of them.  Buffett has them beaten hands down in this space. 

Link to comment
Share on other sites

1 billion invested in a really good business, returning 10-15 % would go alot further than dribs and drabs invested in "long term situations" that add up to a billion.  They can certainly afford it.

To be fair those deals are a lot less scarce than distressed businesses. That's where management comes into play: when to hold cash and wait versus when to invest it in less-than-ideal ventures.

Link to comment
Share on other sites

1 billion invested in a really good business, returning 10-15 % would go alot further than dribs and drabs invested in "long term situations" that add up to a billion.  They can certainly afford it.

To be fair those deals are a lot less scarce than distressed businesses. That's where management comes into play: when to hold cash and wait versus when to invest it in less-than-ideal ventures.

 

I think a great acquisition would be Chou Associates!  ;D  Prem should buy out Francis and bring him back into the Fairfax fold.  We all know that the money management business is spectacular if done right, and bringing Francis back in means that Francis can just grow the money management business for Fairfax.  You still have the Hamblin-Watsa team focusing on investments for Fairfax.  This way, Francis' business will never have to worry about succession for his family, and you bring another younger, quality, ethical manager back into Fairfax to take over as the Hamblin-Watsa principals retire over time...if they so choose! 

 

Because other than Peter Furlan and Paul Ianni, I don't know of any other young analysts at Fairfax who could just step up and fill some shoes.  I'm sure there are a couple, but I don't know who they are.  Wayne Cadawallader is running his own fund, so they probably need to find a Justin Wheeler type or people they already know.  Paul Rivett is quite young and he's in good shape, and if you combine that with Francis, and add another person...Tim McElvaine comes to mind...I think you've got a good team for another generation.  Anyway, I thought I would throw that out there just to stir up some trouble for head office!  ;D  Cheers!

Link to comment
Share on other sites

1 billion invested in a really good business, returning 10-15 % would go alot further than dribs and drabs invested in "long term situations" that add up to a billion.  They can certainly afford it.

To be fair those deals are a lot less scarce than distressed businesses. That's where management comes into play: when to hold cash and wait versus when to invest it in less-than-ideal ventures.

 

I think a great acquisition would be Chou Associates!  ;D  Prem should buy out Francis and bring him back into the Fairfax fold.  We all know that the money management business is spectacular if done right, and bringing Francis back in means that Francis can just grow the money management business for Fairfax.  You still have the Hamblin-Watsa team focusing on investments for Fairfax.  This way, Francis' business will never have to worry about succession for his family, and you bring another younger, quality, ethical manager back into Fairfax to take over as the Hamblin-Watsa principals retire over time...if they so choose! 

 

Because other than Peter Furlan and Paul Ianni, I don't know of any other young analysts at Fairfax who could just step up and fill some shoes.  I'm sure there are a couple, but I don't know who they are.  Wayne Cadawallader is running his own fund, so they probably need to find a Justin Wheeler type or people they already know.  Paul Rivett is quite young and he's in good shape, and if you combine that with Francis, and add another person...Tim McElvaine comes to mind...I think you've got a good team for another generation.  Anyway, I thought I would throw that out there just to stir up some trouble for head office!  ;D  Cheers!

Parsad , The most valuable asset at FFH is Hamblin Watsa, they should be managing money on @ 2 and 20 basis for the rest of the world what ever conflictsthat may exist could be dealt with. FFH shareholders would be winners because of the the new, highly profitable business.
Link to comment
Share on other sites

  • 1 month later...

Just a quick follow-up on this thread as Fairfax is doing exceedingly well on it's small investment.  (It's still trading at a large discount to book) 

 

-initial private placement 5,699,309 shares at a price of .56/share (73% off it's initial investment in Dec 2011)

-16,334,000 warrants with an exercise price of .65/share (49% off it's initial investment in Dec 2011 with the exercise of the warrants)

-2,500,000 and  1,698,200 - The last two purchases Fairfax made was at $.85/share and it is currently trading at $.95/share (14% off it's investment on Nov 1 2012 and Sept 20, 2012) 

 

I hope this is not a long-term investment because of the low quality of the franchises BUT Fairfax did acquire shares at an amazing price while being the largest investor at 45%!!! (after exercising the warrants)

Link to comment
Share on other sites

I have no connection with Pizza Delight but I am rather surprised at the apparent prejudice against these restaurants. Pizza Delight restaurants in this area are quite nice and have been very popular and successful for many, many years. It is not uncommon to have to wait for 10-20 minutes to get a table. While at the same time, giant Pizza Hut closed its doors several years ago and Domino’s offers only take out.

 

Combined with their acquisition of the Prime group of restaurants perhaps Fairfax knows what they are doing and are in the process of building something.

 

While these restaurants may be more working class that upscale, that may not be the point. An old boss of mine used to have a couple of sayings that seem to fit this scenario.  One was "Is there any money in it?" and the other was "Everybody’s gotta eat"

 

Fairfax Restaurants:

Pizza Delight

Mike’s

Score’s

Baton Rouge

East Side Mario’s

Casey’s

Pubs:

Fionn MacCool’s

D’Arcy McGee’s.

Link to comment
Share on other sites

  • 3 months later...

Fairfax Financial Holdings Limited ("Fairfax") (FFH.TO)(TSX:FFH.U) announces the signing of an agreement with GMP Securities L.P. ("GMP"), for GMP's purchase from Fairfax of 9,897,509 common shares and 16,334,000 common share purchase warrants of Imvescor Restaurant Group Inc., representing 23.6% of the common shares of Imvescor on a non-diluted basis and 45.0% of the common shares of Imvescor if the warrants being sold were exercised. The Imvescor shares and warrants are being sold to GMP for $26.1 million. Closing of the sale is expected to occur on or about April 16, 2013.

 

http://finance.yahoo.com/news/fairfax-sells-imvescor-securities-122100312.html

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...