Fairfax and Thomas Cook India: Permanent Capital, Private Equity and Public Markets

In March 2012, the CEO of Fairbridge Capital considered the pros and cons of the potential acquisition of Thomas Cook India. He believed that Thomas Cook India’s two business segments (travel/related services and financial services) had different potential in terms of growth and cash flow generation. Analysts predicted tremendous growth potential in the travel business (although it would require additional investment), while the foreign exchange segment had limited growth potential but generated significant cash flow. Thomas Cook India had changed ownership several times in a short time period, and the stock price had fallen substantially. Would acquiring Thomas Cook India fit the value-investing philosophy rigorously followed by Fairbridge Capital and its parent company, Fairfax Financial? If so, how much should Fairbridge bid? Was Thomas Cook India worth more with two segments or was it better off split into two? Finally, should Fairbridge delist Thomas Cook India or keep it public?