A Privatization Scheme To Consider This notion gives the Voting Trust considerably more credit than they deserve, but if you wanted to privatize Torstar how might you do it at the lowest possible cost? Here is a primer:
· Hire a series of incompetent CEO’s and CFO’s to create a complete lack of confidence in the leadership and future of the business;
· Populate your Board with cronies and unsophisticated business people who wouldn’t challenge the appointment of incompetent and inexperienced executives and are incapable of detecting the privatization scheme;
· Continually reduce the dividend to make the stock ever less attractive to investors;
· Make investments in businesses without any coherent strategy, cash generation abilities, devoid of a clear exit strategy and lacking any synergistic value to your core business;
· Abandon investor relations initiatives and do nothing to support the share value;
· Retain a chair with the appearance of no business acumen to further erode investor confidence;
· Botch simple deals as exemplified by the Postmedia publication swap to demonstrate complete incompetence;
· Rollout DOA initiatives such as the Star paywall, Wall Street Journal, StarMetro, StarTouch, etc. to illustrate the bankruptcy of credible new initiatives.
I doubt that Fairfax is a party to this scheme because I don’t think this is the way they operate, but they could benefit if they are patient enough. The current Voting Trust does not have a next generation waiting in the wings to assume control. All if this could simply be a fantasy play hatched by Honderich to further his legacy-building aspirations. You beat down investors’ confidence to the point where anything they receive is seen as a bonus as the average value of shares now held by investors is likely in the low single-digits.
To make this happen the Voting Trust borrows the money to buy-out the non-Fairfax B shares at a cost of $150 - $180 million. The collateral to secure the loan would be the book value of Torstar, backstopped by Fairfax. A short time after the deal is done, they sell VertigoScope and pay-off the loan. Throughout this, they would also have a deal/understanding to allow Fairfax to assume control at some future date. The Voting Trust would have some sort of Atkinsonian emeritus status to satisfy that legacy requirement.
Perhaps all pure fantasy, but all these connected dots could make for an interesting story.