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Corporate Nov 12, 2013

Watsa is no Warren Buffet: Here’s how he miscalculated Blackberry deal

New York: India-born Prem Watsa, chairman of Fairfax Financial Holdings, the largest shareholder in BlackBerry, may have miscalculated how the public scrutiny of the troubled smartphone maker would impair his efforts to give a new lease of life to the Canadian company, a report said.

Watsa's determination to be personally involved in a "messy corporate implosion" speaks to his own pride, his affection for Canada and his reluctance to walk away from what could be one of the worst moves he ever made, The New York Times reported.

"Psychologically speaking, he thinks he's the Warren Buffett of the North," the report quoted a person who has followed Watsa's ventures closely as saying.

File photo of Prem Watsa: Reuters

File photo of Prem Watsa: Reuters

The person, who have once worked with the 63-year-old tycoon said he most likely miscalculated how public scrutiny would impair his turnaround efforts with BlackBerry.

"He didn't understand the extent the brand recognition mattered here," this person said.

He said Watsa favoured investing in distressed firms with comparatively few shareholders, but BlackBerry was a "notable exception". "When it's down and you can't find a single person to help it, that's where he wants to be," the report said.

"Typically, he does these things in not such public high-profile companies. The rules of the game that he applied over his career don't work in a liquid stock like this," the person added.

While cases like BlackBerry are precisely the sort of challenge Watsa seeks and relishes, the report said Fairfax was blindsided by the amount of publicity generated by the failed buyout offer.

In late September, Fairfax had made an offer to buy BlackBerry but as the takeover deadline loomed, Watsa's firm failed to find co-investors.

Last week, Fairfax and BlackBerry announced a new deal that would raise USD 1 billion in cash through convertible debt sold to a combination of Canadian, American and Qatari investors.

A professor of finance at York University in Toronto Douglas Cumming said that the spotlight on BlackBerry's problems will further erode confidence in the brand. "If they think they can get this all sorted out in the public eye, that's going to be a pretty rare event," Cumming said.

"There have been a lot of smarter people looking at this, and they can't seem to make it work," he said.

PTI


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