Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: FairFacts on April 19, 2018, 08:05:33 PM

Title: Toys R Us
Post by: FairFacts on April 19, 2018, 08:05:33 PM
Fairfax has signed an agreement to buy the Toys R Us (Canada).
Title: Re: Toys R Us
Post by: Parsad on April 19, 2018, 08:50:32 PM
Fairfax has signed an agreement to buy the Toys R Us (Canada).

They have a ton of retail experience...I'm guessing this is going to be another Bill Gregson turnaround project.  My nephew and niece are going to love the fact that I know the owner of Toys R Us now!  Cheers!
Title: Re: Toys R Us
Post by: chrispy on April 20, 2018, 04:50:47 AM
Whoa.
Title: Re: Toys R Us
Post by: dartmonkey on April 20, 2018, 03:48:52 PM
Fairfax has signed an agreement to buy the Toys R Us (Canada).

Yes, but they have only commited to buying it at $300m if there is not a better offer. They would get $9m if a better offer is accepted. $9 million dollar bills don't grow on trees, but for Fairfax, this is pocket change, unless they really buy the asset (which I doubt).
Title: Re: Toys R Us
Post by: ourkid8 on April 20, 2018, 04:38:50 PM
Why do you have doubts?  The next 'best' offer was from Billionaire Isaac Larian, who heads MGA Entertainment, put in a bid of US$215 million.

Fairfax has signed an agreement to buy the Toys R Us (Canada).

Yes, but they have only commited to buying it at $300m if there is not a better offer. They would get $9m if a better offer is accepted. $9 million dollar bills don't grow on trees, but for Fairfax, this is pocket change, unless they really buy the asset (which I doubt).
Title: Re: Toys R Us
Post by: FFHWatcher on April 20, 2018, 06:42:11 PM
Fairfax has signed an agreement to buy the Toys R Us (Canada).

Yes, but they have only commited to buying it at $300m if there is not a better offer. They would get $9m if a better offer is accepted. $9 million dollar bills don't grow on trees, but for Fairfax, this is pocket change, unless they really buy the asset (which I doubt).

$9M would pay CEO salary for the next 15 years.  That's probably Prem's cost basis on his FFH shares
Title: Re: Toys R Us
Post by: Parsad on April 20, 2018, 09:48:29 PM
Fairfax has signed an agreement to buy the Toys R Us (Canada).

Yes, but they have only commited to buying it at $300m if there is not a better offer. They would get $9m if a better offer is accepted. $9 million dollar bills don't grow on trees, but for Fairfax, this is pocket change, unless they really buy the asset (which I doubt).

I think they would buy it...over $1B in revenue for $300M with all creditors settled and a clean balance sheet.  This has Bill Gregson running it written all over it.  If somebody outbids them, then they walk away with $9M. 

The toy industry is one ripe for consolidation...retail brick and mortar stores will struggle against Amazon unless they can get scale and continue to move a lot of their business online.  Order online and get delivery or pick up at the nearest store...that's the way everyone is going.  Cheers!
Title: Re: Toys R Us
Post by: cwericb on April 21, 2018, 01:14:18 AM
Gregson did well with The Brick and FFH has some experience in the sector with Megablocks.
Title: Re: Toys R Us
Post by: ValueMaven on April 22, 2018, 12:05:12 PM
I really dont get why FFH thinks they need to do something at every chance possible??  Toys R Us??  Are you kidding me? 

How about focus on improving underwriting standards across the business lines/Allied?  Allied has been a big time mistake in the short-term, particularly 1) Given all of the losses 2) The fact that we used UNDERVALUED FFH shares, which were trading right at BV to 3) Acquire a business basically at the top of the reinsurance market (note: most reinsurance stocks outside of XL are down -20% or more)...

really wish FFH diversified out of all of these small/crappy/POS businesses and tried to focus on improving underlying earnings...

I dont get it

Title: Re: Toys R Us
Post by: FairFacts on April 22, 2018, 05:49:20 PM
I really dont get why FFH thinks they need to do something at every chance possible??  Toys R Us??  Are you kidding me? 

How about focus on improving underwriting standards across the business lines/Allied?  Allied has been a big time mistake in the short-term, particularly 1) Given all of the losses 2) The fact that we used UNDERVALUED FFH shares, which were trading right at BV to 3) Acquire a business basically at the top of the reinsurance market (note: most reinsurance stocks outside of XL are down -20% or more)...

really wish FFH diversified out of all of these small/crappy/POS businesses and tried to focus on improving underlying earnings...

I dont get it


Patience Grasshopper......

I don't get it either, we don't have the info that the Fairfax folks are looking at so I don't sweat over the individual investment decisions. Look at the divestments last year Bank of Ireland, ICICI Lombard, First Capital, all huge winners... as I said patience!
Title: Re: Toys R Us
Post by: ourkid8 on April 23, 2018, 11:37:16 AM
Now the question is, did we overpay? 

https://www.bnn.ca/toys-r-us-ends-canadian-stores-auction-with-fairfax-as-the-only-bidder-1.1065324

Toys "R" Us's Canadian operations have found a safety net months after the retailer's demise in the U.S. and overseas.
Documents filed in a Richmond, Va. bankruptcy court on Monday revealed the retailer will be cancelling an auction for its 82 Canadian stores and seeking approval on Tuesday to sell them to Toronto-based Fairfax Financial Holdings Ltd., which is involved in property and casualty insurance and reinsurance and investment management.

Title: Re: Toys R Us
Post by: FairFacts on April 23, 2018, 01:13:27 PM
Now the question is, did we overpay? 

https://www.bnn.ca/toys-r-us-ends-canadian-stores-auction-with-fairfax-as-the-only-bidder-1.1065324

Toys "R" Us's Canadian operations have found a safety net months after the retailer's demise in the U.S. and overseas.
Documents filed in a Richmond, Va. bankruptcy court on Monday revealed the retailer will be cancelling an auction for its 82 Canadian stores and seeking approval on Tuesday to sell them to Toronto-based Fairfax Financial Holdings Ltd., which is involved in property and casualty insurance and reinsurance and investment management.


According to the Financial Post today....
'The unit has generated positive free cash flow since filing in September amid higher than projected sales and lower than expected disbursements, according to the most recent court monitor report. It reported $69 million of cash flow since filing for creditor protection, with a $36.7 million cash balance at March 31.'

So if it can do $69mil annual cash flow and get some synergies with the Performance Sports business it looks like a pretty good price to me.
Title: Re: Toys R Us
Post by: ourkid8 on April 26, 2018, 05:02:38 AM
Thanks Sanjeev for hosting a lovely evening last night.  As per Prem and team, here is what they saw in Toys R us:

-$220-225m in real estate
-1 billion in sales
-The company can run in standalone not needing its parent entity
-$100m of edbitda/year
-Online sales have doubled in the last 5 years
-They are pleased with the current management

Now let's see how this company performs out of bankruptcy as there is a lot of stink around the company going under.  We all know it is the US parent but ppl may not shop there until they feel comfortable it will be around. 
Title: Re: Toys R Us
Post by: petec on April 26, 2018, 05:12:21 AM
I really dont get why FFH thinks they need to do something at every chance possible??  Toys R Us??  Are you kidding me? 

How about focus on improving underwriting standards across the business lines/Allied?  Allied has been a big time mistake in the short-term, particularly 1) Given all of the losses 2) The fact that we used UNDERVALUED FFH shares, which were trading right at BV to 3) Acquire a business basically at the top of the reinsurance market (note: most reinsurance stocks outside of XL are down -20% or more)...

really wish FFH diversified out of all of these small/crappy/POS businesses and tried to focus on improving underlying earnings...

I dont get it

Why does the investing side detract from the management attention that can be given to the insurance side? The guy who can improve results at Allied is Andy Barnard; he *is* focussed on that, not on Toys R Us.
Title: Re: Toys R Us
Post by: petec on April 26, 2018, 05:17:14 AM
Thanks Sanjeev for hosting a lovely evening last night.  As per Prem and team, here is what they saw in Toys R us:

-$220-225m in real estate
-1 billion in sales
-The company can run in standalone not needing its parent entity
-$100m of edbitda/year
-Online sales have doubled in the last 5 years
-They are pleased with the current management

Now let's see how this company performs out of bankruptcy as there is a lot of stink around the company going under.  We all know it is the US parent but ppl may not shop there until they feel comfortable it will be around.

I thought the RE might be a key part of it. Am I right that it is debt free? Because if so they've basically paid 3x ebitda, or 1x after RE, which suggests kinda limited downside even if Amazon does come along and eat their lunch.

Not so sure about Bill Gregson though - isn't he kinda busy? ;)
Title: Re: Toys R Us
Post by: ourkid8 on April 26, 2018, 06:31:46 AM
Sanjeev confirmed it is a clean balance sheet so yes, it was a steal of a deal  :)  Now the concern is the risks coming out of bankruptcy while the parent is under liquidation...

Thanks Sanjeev for hosting a lovely evening last night.  As per Prem and team, here is what they saw in Toys R us:

-$220-225m in real estate
-1 billion in sales
-The company can run in standalone not needing its parent entity
-$100m of edbitda/year
-Online sales have doubled in the last 5 years
-They are pleased with the current management

Now let's see how this company performs out of bankruptcy as there is a lot of stink around the company going under.  We all know it is the US parent but ppl may not shop there until they feel comfortable it will be around.

I thought the RE might be a key part of it. Am I right that it is debt free? Because if so they've basically paid 3x ebitda, or 1x after RE, which suggests kinda limited downside even if Amazon does come along and eat their lunch.

Not so sure about Bill Gregson though - isn't he kinda busy? ;)
Title: Re: Toys R Us
Post by: ourkid8 on April 26, 2018, 02:40:55 PM
https://www.bnn.ca/fairfax-eyeing-some-u-s-stores-after-toys-r-us-canada-purchase-1.1067704

I am a bit confused in how the value of the real estate today is worth ~$300M and yesterday $220-225... lol  Nonetheless, buying pods of profitable stores in the US is great news! 



Title: Re: Toys R Us
Post by: chrispy on April 27, 2018, 04:59:08 AM
So after seeing the books they must have liked SOME of what they saw in the US?
Title: Re: Toys R Us
Post by: TwoCitiesCapital on April 27, 2018, 08:16:31 AM
https://www.bnn.ca/fairfax-eyeing-some-u-s-stores-after-toys-r-us-canada-purchase-1.1067704

I am a bit confused in how the value of the real estate today is worth ~$300M and yesterday $220-225... lol  Nonetheless, buying pods of profitable stores in the US is great news!

$225M is their conservative estimate of the worth. $300M is the realistic/optimistic view given real estate markets and the global economy humming along.
Title: Re: Toys R Us
Post by: petec on April 28, 2018, 12:27:27 AM
https://www.bnn.ca/fairfax-eyeing-some-u-s-stores-after-toys-r-us-canada-purchase-1.1067704

I am a bit confused in how the value of the real estate today is worth ~$300M and yesterday $220-225... lol  Nonetheless, buying pods of profitable stores in the US is great news!

$225M is their conservative estimate of the worth. $300M is the realistic/optimistic view given real estate markets and the global economy humming along.

Wow. This is a steal. I believe KW had a hand in checking the RE valuation.
Title: Re: Toys R Us
Post by: StubbleJumper on April 28, 2018, 11:27:17 AM
https://www.bnn.ca/fairfax-eyeing-some-u-s-stores-after-toys-r-us-canada-purchase-1.1067704

I am a bit confused in how the value of the real estate today is worth ~$300M and yesterday $220-225... lol  Nonetheless, buying pods of profitable stores in the US is great news!

$225M is their conservative estimate of the worth. $300M is the realistic/optimistic view given real estate markets and the global economy humming along.

Wow. This is a steal. I believe KW had a hand in checking the RE valuation.

Not sure that I'd declare it a steal just yet, but at least the real estate places a nice floor on the outcome.  I've seen too many "cheap" retailers where the value never worked out.  Sears and radio shack come to mind.   I don't know enough about toys r us to assess the sustainability of its ebitda, but at least the real estate is our put option.