NU Online News Service, Sept. 8, 3:04 p.m. EDT
Toronto-based Fairfax Financial Holdings Limited is making a bid of approximately $960 million to acquire a minority stake in Stamford, Conn.-based Odyssey Re.
Under the transaction, Fairfax said it would acquire all of the outstanding shares of common stock of Odyssey Re Holdings Corp. that it does not currently own for $60 per share in cash. Fairfax noted that it currently owns 72.6 percent of shares of common stock of Odyssey Re, and the current proposal would be for the remaining 27.4 percent.
Odyssey said it would consider the proposal, but at this point there is no assurance of an agreement.
Fairfax said the price represents a 19.8 percent premium over Odyssey Re's Sept. 4 closing price, and a 23.2 percent premium over the 30-day average closing price.
The proposed acquisition of shares would be funded with proceeds generated by the issuing of new equity under its existing shelf prospectus, according to Fairfax.
"Following completion of the proposed acquisition of Odyssey Re and the proposed Fairfax new equity issuance, Fairfax expects to continue to have in excess of $1 billion in cash and marketable securities at the holding company level," the company said.
Fairfax added that there would be no changes in Odyssey Re's strategic or operating philosophy upon closure of the proposed transaction. "Under the leadership of Andy Bernard, president and CEO, Odyssey Re will continue to operate its business exactly as it has always been run, on an independent and decentralized basis," said Fairfax.
Odyssey Re confirmed that it received the unsolicited proposal from Fairfax, and that Fairfax had previously notified Odyssey Re's board of directors that it wished to explore a potential acquisition.
Furthermore, Odyssey Re said it has appointed a special committee composed of independent directors to review and consider Fairfax's proposal.
"No decisions whatsoever have been made by the special committee at this time with respect to its response, if any, to the Fairfax proposal," Odyssey Re said. "There can be no assurance that any agreement will be executed with Fairfax or that any transaction will be approved or consummated."
Reacting to the Fairfax announcement, the A.M. Best Co. rating firm said it would make not changes to the ratings of Odyssey Re or Fairax.
Best said it believes that Odyssey Re's business strategy is not expected to change in a meaningful way and the group will benefit prospectively from the liquidity and financial resources of Fairfax.
It commented that, "Fairfax, through Hamblin Watsa Investment Counsel, has managed Odyssey Re's investments, which have contributed significantly to Odyssey Re's earnings in recent years. Given the historic majority ownership of ORH by Fairfax, A.M. Best also believes that integration risk should not be a significant issue, going forward."
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