Just get on with it Fairfax! Herein are the reasons for continuing to accumulate TS.B:
· Fairfax made an offer a year ago and was rebuffed and yet in November they bought another 9.4 million shares. If they didn’t have a path to ownership and or control they wouldn’t have committed another significant amount of cash to a lost cause. They are very sophisticated investors and it would defy logic to throw good money after bad.
· Insiders have not bought any shares for more than a year which tells me there is an existing agreement with Fairfax for those aware of an impending deal which prohibits them from buying shares. At a minimum, Boynton should have acquired a substantial number of shares and he hasn’t invested a penny. Too obvious a signal to be overlooked in my opinion.
· The underlying value of Torstar far exceeds the current market cap of $130 million. My rough estimation of the value is as follows:
Vertical Scope - $3/share
StarMedia Group - $2/share
Metroland Media Group - $2/share
Joint Ventures including Black Press, Blue Ant, Canadian Press, Nest Wealth Inc and Workopolis - $1/share
Cash and elimination of corporate costs - $1/share
Future synergies with Postmedia and Gesca - $3/share
Fairfax isn’t going to pay for the synergies and will have to do considerable work to extract the value from a deal for Torstar. It won’t add up to $12, but at this stage many current shareholders should be delighted at $6 or $7/share.
The Voting Trust members would be relieved to get out from under the soul destroying decline of this once proud organization at a price that saves them the humiliation of eventually seeing the business declare bankruptcy on their watch.
Employees would also finally be liberated from the insanity that has pervaded the organization for more than a decade. Enlightened and financially secure ownership would attract and retain talent and would create the foundation for a successful and important transformation of the news media business.
It defies logic why the bank analysts or the financial press hasn’t connected the dots on this scenario. I know they have lost interest in Torstar for reasons too long to enumerate.
Fairfax is making its moves in broad daylight and yet the shares are trading well south of $2. Prem Watsa attracts considerable media attention and for the most part all that is reported are press releases. Maybe someone will shine a light on this and then watch the share price.
Fairfax has secured all of the large holdings of institutional investors and their next move could be to either vacuum up significant amounts of retail shares or dislodge shares from some or all of the Voting Trust family members.
The end or beginning is near depending on your perspective. Just get on with it Prem!