January 15, 2008

Power Financial Corp: Sum of the parts greater than the whole

I have been looking into Power Financial PWF as it attracted my attention. The business and its collection of assets is attractive. I did a quick calculation of its sum of the assets value and it came to more than the market capitalization for PWF as below. The sum of the parts is 20% premium more than the market value of PWF, well there is a small debt of $250 Mil, but that does not explain the discount.

The discount is even more when you consider the discount to net asset value in its Pargesa holdings.

Do anyone have any insight or information that you can share with me about the company? or why would such a discount exist?


John said...

POWER FINANCIAL CORP (PWF) is a holding and management company. Its operations provide a range of individual and corporate financial and fiduciary services in North America and Europe. Subsidiaries include Great-West Lifeco, IGM Financial, London Insurance Group, Canada Life Financial, Investors Group, and Mackenzie Financial, and major affiliate Pargesa Holding SA of Switzerland

There is also a POWER CORP. OF CANADA (POW) an international management and holding company. Its principal subsidiaries are Power Financial Corp., Power Technology Investment Corp. and Gesca Ltee. Subsidiaries of Power Financial include Great-West Lifeco, IGM Financial, London Insurance Group, Canada Life Financial, Investors Group, Mackenzie Financial Corporation, and its affiliate Pargesa Holding SA.

I do not see all the parts in your chart

Also is this not just the classic holding company discount?

I own PWF, IMG and GWO. I never did figure out POW vs PWF.))))

Most holding companies would be worth more broken up.

The only company that I know where the reverse is true is GE

John said...
This comment has been removed by the author.
Sami said...

I think POW owns a significant chunk of PWF. So POW owns PWF which in turn owns GWO, IGM and Pargesa.

It is very complicated structure that I think benefits some one. I just need to figure who and if there is any hidden liabilities in the structure.

I have noticed some securitzation deals, which i need to understand along with some convertible securities that Pargesa issued.

Sami said...

hi John,

Why would you hold PWF, IMG and GWO? I would hold PWF as they own majority of IGM and GWO.

Or better yet I would go long PWF and short IGM and GWO betting that the discount in PWF would correct some time. It would be a neutral arbitrage opportunity.

John said...

You are much more sophisticated then I am.

A while back I simply started purchasing all of the components of XDV in my non RRSP account to generate tax advantaged dividends without paying the MER to I share (ie create my own version of I share XDV)

The only one I did not buy was POW (I may do that to complete my set))))