After extending a lifeline to the company in 2011, Canadian
financial services holding company Fairfax Financial (
) sold its entire stake in Canadian company Imvescor (
) to GMP Securities. The stake included 9,897,509 shares and
16,334,000 warrants which represents 23.6% of the company, or 45%
if the warrants were issued, in a transaction worth $26.1
million. Down 2.05%, Imvescor Restaurant Group shares trade for
$1.43 per share on Tuesday afternoon.
Shares having averaged $0.55 in the fourth quarter of 2011, when
, Fairfax Financial founder, purchased the holding, he would have
made a 160% profit on the shares if he had sold on the open
market. Because he sold both shares and warrants to a private
company, the exact sale price for each is unknown. The warrants
have an exercise price of $0.65 and had a five-year expiration
Fairfax first became a significant investor when the company was
in need of refinancing and recapitalization in October 2011. That
year, Imvescor's share price plunged 75%. The company entered
into an agreement with Fairfax to pay off its then existing
convertible debentures in a series of transactions. Combined with
rights offerings it also held, Imvescor raised $25 million.
In addition, Fairfax became entitled to designate at least 40% of
Imvescor's nominee directors and the chair of the board of
directors, subject to certain conditions. With the sale of the
shares, Fairfax's Bradley Martin and Ron Barbaro resigned their
positions as members of the company's board of directors.
Fairfax's financial assistance and business guidance helped
Imvescor get back on its feet.
"Fairfax greatly contributed to position the Company for a return
to long-term growth and profitability. Even though Imvescor did
not represent for Fairfax a significant portfolio investment, its
generous advice and support significantly contributed to grow
Imvescor into a stronger business with vastly increased
expertise" said Denis Richard, Imvescor president and chief
executive officer said in the company's statement.
"The recapitalization was undertaken in conjunction with the
support of the Imbeault family, the founders of the Imvescor
business, and resulted in the stabilization of the company and
its prospects. Following this sale by Fairfax of its interest in
Imvescor, the Imbeault family will be the single largest
shareholder of Imvescor," Fairfax noted in its statement.
Imvescor is a national franchise company based in Canada,
operating 251 casual dining and take-out restaurants with the
brand names Pizza Delight, Mikes, Scores and Baton Rouge. Watsa's
$2.5 billion portfolio is configured with just 0.9% invested in
the consumer defensive sector, though he has no other restaurant
holdings in his U.S.-traded portfolio, according to GuruFocus
He has, however, participated in other recapitalizations of
financially struggling companies in recent years. Several months
prior to the Imvescor deal, in July 2011, Watsa and fellow guru
, along with several other investors, took a 34.9% stake in the
Bank of Ireland (
). Watsa's stake alone was 9% of the company.
Watsa also bought almost 52 million shares of the Canadian
smartphone maker Research In Motion (
) from 2010 to 2012 at an average cost of $17. The company's
price has lost 87% over the past five years, but rebounded 28%
year to date to trade for $15.15 on Tuesday afternoon.
Imvescor has a $61.29 million market cap, P/E of 22.81, P/B of
1.01 and P/S of 1.34. In 2012, it reported $47.3 million in
revenue, up from $44.39 million in 2011, and net income of $1.85
million, up from $2.04 million in 2011.
Fairfax's sale to GMP Securities is expected to close on or about
April 16, 2013, after which point the investment dealer plans to
resell the shares and warrants on a private placement basis in
one or more transactions.
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