Bloomberg News

Fairfax’s Watsa May Increase RIM Stake After Joining Board

February 01, 2012

Jan. 23 (Bloomberg) -- Prem Watsa, who patterns his value investments after Warren Buffett, said his Canadian insurance company may buy more shares of Research In Motion Ltd. after Watsa was appointed to the board of the BlackBerry maker,

Watsa, 61, was named a RIM director late yesterday as part of an executive shuffle that saw co-Chief Executive Officers Jim Balsillie and Mike Lazaridis step down. Watsa’s Toronto-based Fairfax Financial Holdings Ltd. owned 3.4 million RIM shares at the end of September, making it the fourth-largest investor, according to data compiled by Bloomberg.

“We are looking at purchasing more” shares, said Paul Rivett, a Fairfax spokesman. Watsa, the Fairfax CEO and chairman, was travelling and unavailable to comment, Rivett said.

Born in Hyderabad, India, Watsa built Fairfax by investing the assets of insurance operations in out-of-favor securities. RIM, once the most valuable company in Canada, has lost 88 percent since its peak in 2008.

Fairfax benefited from declines in U.S. banks during the financial crisis, purchasing credit-default swaps on lenders. The swaps, instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt, led to investment gains of $2.72 billion in 2008.

Shares of Toronto-based Fairfax have risen more than 25 times since May 1987, according to Bloomberg data. Fairfax rose 0.9 percent to C$418 at 12:28 p.m. in Toronto. The market value of C$8.96 billion tops RIM’s value of C$8.37 billion.

Muni Bonds

Watsa has shifted in recent years to investing in U.S. municipal bonds backed by Buffett’s Berkshire Hathaway Inc., and since 2009 has recommended shares of companies such as Wells Fargo & Co., Johnson & Johnson, Kraft Foods Inc. and US Bancorp.

“The underlying fundamentals are there for everyone to see, but it’s boring,” Watsa told reporters last year. “No one wants to buy something that will take five, six years” to double in value.

Last week, Fairfax agreed to invest about $70 million for a 25 percent stake in Thailand’s Thai Resinsurance Public Co. to expand its holdings in Asia.

Over the last year, Fairfax has agreed to buy stakes in Canadian retailers William Ashley China Ltd. and Sporting Life Inc., and bought Prime Restaurants Inc. for about C$53 million.

Not all of Fairfax’s investments have been successful. Watsa said in 2009 that Fairfax wrote down its investment in CanWest Global Communications Corp., a media company, after the value of its 22 million share stake plunged 94 percent in a year. The company also wrote down investments in publisher Torstar Corp. and AbitibiBowater Inc. at the time.

--Editor: David Scanlan, Dan Kraut

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; David Scheer at dscheer@bloomberg.net.


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