Wednesday, September 25, 2013

Meet IIT-Madras alumnus Prem Watsa, iconic BlackBerry’s new owner

Forty two years after he migrated to Canada, V. Prem Watsa, who was then just another IIT engineer in search of an MBA, now holds the future of an ailing, but still iconic BlackBerry in his hands. On Monday afternoon, a consortium led by Fairfax Financial Holdings, Watsa's flagship company, bid $9 a share to buy out Blackberry.

A 1971 batch IIT-Madras graduate in chemical engineering, Watsa arrived in Canada with little more than pocket change with which to pursue his dreams. He did his MBA from the Richard Ivey School of Business at the University of Western Ontario.

Since then, he has made a name for himself, mostly as an investor who identifies distressed and undervalued assets, bets on them, and reaps returns. Fairfax Financial Holdings, an insurance-cum-investment company that Watsa founded in 1985, went on to become Canada's most profitable company in 2008.

"I know he is an ardent admirer of Warren Buffett and is sometimes referred to as the Warren Buffett of Canada," says MG Venkatesh Mannar, the Ottawa-based President of The Micronutrient Initiative, and Watsa's senior at IIT-Madras. "I remember him then as a shy and reserved person (maybe he still is)."

Funds for Alma Mater
Watsa, Mannar says, has made significant contributions to the IIT-Madras Alumni Fund. Despite a couple of recent lacklustre years, Fairfax Financial Holdings' revenue crossed $8 billion in 2012, up over 7% from a year earlier, with net profit at $532.4 million and nearly $37 billion in assets, spread across pulp mills, specialty retailers, and restaurant chains. Its stock price has compounded at 19 percent annually.

Watsa, 63, and one of the wealthiest individuals in Canada, is reclusive by nature and limits public appearances mostly to Fairfax's annual shareholder meetings. However, his company's latest move - a $4.7 billion bid to buy smartphone maker BlackBerry, has put the spot light on the Hyderabad-born billionaire. BlackBerry is by far the most high profile company in Canada and Fairfax - short for fair, friendly acquisitions - is its largest shareholder with around a 10% stake. Fairfax raised its stake in Blackberry from 2 percent in January 2012 (when he joined the Blackberry board) to 10% by mid-2013, during a period when the company stock prices were on a decline.

Last month, when BlackBerry announced it was exploring options for a sale, Watsa resigned as a director on the Blackberry board, citing potential conflict of interest. This was read as a statement of intent to mount a bid for the company.

Watsa has been a strong believer in BlackBerry from the time he started buying its shares. "The brand name, a security system second to none, a distribution network across 650 telecom carriers worldwide, a 79 million subscriber base, enterprise customers accounting for 90% of the Fortune 500....are all formidable strengths.." he wrote in a letter to Fairfax Financial shareholders this March.

Truck Start
His professional career started in 1974 at the Confederation Life Insurance Co. (CLI) in Toronto, where he stayed till 1983, rising to become the company's vice president. After a short stint at GW Asset Management, he founded his own asset management company - Hamblin Watsa Investment Counsel Ltd. (now wholly owned by Fairfax) - along with his former boss at CLI and three others. In 1985, Watsa bought over Markel Financial, a Canadian company specialising in trucking insurance, and later renamed it Fairfax Financial Holdings.

Watsa's mantra of risk-averseness and long term view has stood him well over the years, but it's his eye for the big picture that enables him to see investment pitfalls and financial crises way before others, say observers. He was among the first to predict the crash of 1987, the Japanese collapse of 1990 and the 2008 sub-prime mortgage crisis in the US.

Source: The Economic Times (Online Edition), September 25, 2013

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