Fairfax Financial stayed true to its value call on CanWest Global Communications by picking up an additional 2.9 million shares in the beaten-down media company on Wednesday.
Fairfax added to what's now a 22 per cent stake in CanWest's subordinated voting shares and 12.5 per cent stake in the company.
There has been talk in the past that Fairfax would work with CanWest's controlling shareholders - the Asper family - to buy out public shareholders in a company that now has a $171-million market capitalization. So in noting the latest purchase, CIBC World Markets analyst Bob Bek said: “Privatization speculation will start once more.”
But that's not the speculation that's now making the rounds. The universal view on a CanWest privitization is that the Asper clan couldn't (or won't) shoulder the extra loans needed to take out minority shareholders, even with Fairfax's support.
The talk among investment bankers is over what units of CanWest might eventually get sold to pay down $3.6-billion of debt. CanWest does have some flexibility on its borrowing, as very little debt comes due in the next year. But with two credit rating agencies in the process of reviewing their ratings, with an eye towards downgrades, CanWest may move sooner rather than later to trim debt. Moody's and DBRS are both combing through CanWest's balance sheet.
CanWest shares are changing hands at 96 cents on Thursday, well off 52-week highs of $7.60. Fairfax is known as a classic value investor, with a long time horizon and a willingness to inject capital into companies with balance sheet woes.
