TORONTO – Prem Watsa, the Canadian investor who made $1.15 billion betting against U.S. real estate, is now trying to reverse his investment losses on BlackBerry Ltd. by taking the smartphone maker private.
Watsa, 63, who models his investment strategy after Warren Buffett, said last week that his Toronto-based insurance firm, Fairfax Financial Holdings Ltd., is leading a group that plans to bid $4.7 billion for BlackBerry.
As the largest shareholder of the Waterloo, Ontario, company, Watsa is trying to match his investment gains from the U.S. housing crisis and the Bank of Ireland while avoiding the losses from other bets.
He’s capable of doing some really smart things, but he’s also capable of doing some really dumb things, and I don’t know which one this is, said David Baskin, president of Baskin Financial Services Inc., in Toronto last week.
The value of the tentative bid for BlackBerry would be the biggest yet led by Fairfax. The insurance holding company, founded by Watsa in 1985, said last week it would buy back as much as 5 percent of its stock over the next 12 months.
In the BlackBerry transaction, the insurer won’t provide additional financing outside the equity stake it currently owns, expecting its partners to contribute the remaining debt and equity, Watsa said last week.
The insurance company holds 51.9 million BlackBerry shares worth $457.4 million based on last week’s share price, data compiled by Bloomberg show. BlackBerry is Fairfax’s largest investment.
We wouldn’t put our name on the line and we wouldn’t do this unless we were very confident, Watsa said.
Watsa, who hails from Hyderabad, India, has led the company through hits and misses, acquiring assets as varied as a pet insurer, a cremation home, and stakes in media companies in Canada.
Watsa’s investment in BlackBerry hasn’t panned out so far. He agreed to double his stake in January 2012 and has paid an average of $17 a share for his 10 percent stake. The shares closed in Friday at $8.09 in New York.
Fairfax’s profit before one-time items reached a record $1.69 billion in 2008 as the company recorded investment gains on credit-default swaps on U.S. banks and insurers. The swaps became more valuable as the subprime mortgage market collapsed and banks began to fall. Profit was $541 million last year.
Fairfax shares gained 25 percent in the last five years, compared with a 2.2 percent gain in the Standard & Poor’s/TSX Composite Index.