Thomas Cook and Fairfax

Prem Watsa, Chairman and CEO of Fairfax Financials, has compounded book value at 21.2% and stock price at 19% since 1985. There was a great deal of excitement when Fairfax took over the Thomas Cook operations in India. All investors, value, momentum and traders piled up on the stock. The best analysis post the acquisition was provided by renowned value investor, Sanjay Bakshi on Thomas Cook as an investment vehicle for Fairfax in India. See here

Fast forward, a couple of years and below is what appeared on the annual report of Fairfax Financials in March.


It raises the following questions

  • Looks like Thomas Cook will also be a acquisition vehicle but all big ticket items would go through this new entity.
  • Given the fees that Fairfax would gain from the transactions through the new entity, it seems it is logical that the best of ideas might flow through the new entity.
  • Why could Fairfax just not recapitalize Thomas Cook to be owned through an entity in Canada and issue more stock at the current price?
  • Will there be any conflict of interest every time Fairfax uses the allocation vehicle instead of Thomas Cook to Thomas cook shareholders? Will Thomas Cook shareholders be shortchanged in the long run?

I have always been a big fan of Prem Watsa but it looks like the current move is more beneficial to Fairfax owners than to Thomas Cook.

Disclosure: Own shares of both Fairfax and Thomas Cook India