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Watsa successful at reviving fallen angels

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Fairfax Financial CEO Prem Watsa is often called the Warren Buffett of Canada.

FRANK GUNN / THE CANADIAN PRESS ARCHIVES Enlarge Image

Fairfax Financial CEO Prem Watsa is often called the Warren Buffett of Canada.

TORONTO -- Less than seven weeks after stepping down from the board at BlackBerry, billionaire investor Prem Watsa emerged Monday as the face behind a $4.7-billion deal to save the Canadian tech giant.

Often referred to as the Warren Buffett of Canada for his investment choices, Watsa is in the spotlight for helping broker the potential sale of the struggling smartphone maker.

"He's obviously a value investor. He's a bargain hunter but not in the classic short-term sense," said Eric Kirzner, a professor of finance at the Rotman School of Management at the University of Toronto.

"Like Buffett, he likes to acquire great companies at bargain prices and hold them for a long time and sometimes gets actively involved."

Watsa, who heads insurance firm FairFax Financial, is leading a consortium that will acquire all the outstanding shares of the Waterloo, Ont.-based BlackBerry for US$9 per share. Toronto-based FairFax is already the struggling smartphone maker's largest shareholder, owning about 10 per cent of the stock.

Watsa joined the board at BlackBerry in January 2012 following a shakeup at the executive level with the departures of BlackBerry co-CEOs Jim Balsillie and Mike Lazaridis and their replacement in the top job by current CEO Thorsten Heins.

At the time, the FairFax chairman and chief executive said a turnaround for the maker of smartphones that were once so popular they were known as CrackBerries would take upwards of three to five years.

Kirzner said the timing of this deal is questionable, considering it's been less than two years since Heins took over.

Since then, the company has slashed staff, with some 4,500 employees -- 40 per cent of the remaining workforce -- being let go in the latest round of job cuts announced Friday.

In the same announcement, BlackBerry said it would face a writedown of nearly $1 billion when it reports its latest quarterly earnings this Friday.

The news sent the stock plummeting, down 16 per cent to close at C$9.08 Friday on the Toronto Stock Exchange. It was unchanged Monday.

"This is interesting but hardly definitive at this stage," said Kirzner, the John H. Watson chair in value investing at Rotman.

"It is consistent of the Prem Watsa approach to things, of finding and unlocking value in unusual places."

He said like the American business magnate Buffett, Watsa has had a fairly high success rate at targeting "fallen angels" and bringing back returns to his investors. But with BlackBerry, it's unclear at this stage whether that's how this purchase may play out.

"There are so many questions about it. It looks clever and it looks like it may set off a flurry of activity. Maybe some other white knights are going to come along," said Kirzner.

"Maybe that's the intent of this, or maybe the intent is for Mr. Watsa to acquire the company, but I just don't know."

Watsa, who generally stays out of the media spotlight but often writes long letters to shareholders, has not always been successful in investing in struggling Canadian companies.

Among the missteps, Fairfax took a writedown on its investment in former Canadian media giant Canwest Global Communications, which eventually was carved up in creditor protection.

 

-- The Canadian Press

Republished from the Winnipeg Free Press print edition September 24, 2013 B5

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Updated on Tuesday, September 24, 2013 at 6:55 AM CDT: Fixes headline

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