Odyssey Re Final Shares Going to Fairfax At A Higher Price

NU Online News Service, Sept. 21, 2:12 p.m. EDT

Toronto-based Fairfax Financial Holdings Limited will be paying $1 billion to fully acquire Odyssey Re Holdings at a higher share price than originally announced.

On Sept. 4 the company said it would pay $60 per share in cash for the common stock it did not currently own. Friday the two companies announced a merger agreement under which Fairfax is offering $65 in cash per share.

Stamford, Conn.-based Odyssey Re's board said it was following the recommendation of its Special Committee of Independent Directors which reviewed Fairfax's proposal and recommending to minority stockholders that they tender their shares in the Fairfax offer.

Marshfield Associates Inc., which currently has management and control over approximately 2.7 million shares representing the largest block held by Odyssey Re's minority stockholders, has agreed to tender the shares over which it has control to Fairfax's $65 per share offer.

The announcement said the price of $65 per share in cash represents a 29.8 percent premium over the closing price on Sept. 4, the date on which Fairfax publicly announced that it was proposing to acquire all outstanding shares of common stock of Odyssey Re that Fairfax does not currently own.

According to Odyssey Re and Fairfax, the price is also a 33.4 percent premium over the 30-day average closing price for the period ending on Sept. 4. Based on Odyssey Re's initial public offering price of $18 per share in June 2001, the purchase price represents a compounded annual return of 17.3 percent through the date of the merger agreement.

Prem Watsa, Fairfax chairman and chief executive officer, said: "We believe that our increased offer price of $65 per share, which is well above any price at which Odyssey Re shares have ever traded, represents a very attractive price for Odyssey Re's minority stockholders."

He said Fairfax was gratified to get the recommendation of Odyssey Re's Special Committee and "looks forward to working together to complete the transaction."

Mr. Watsa added, "Following the successful completion of our offer, there will be no changes in Odyssey Re's strategic or operating philosophy; under the excellent leadership of Andy Barnard, president and CEO, Odyssey Re will continue to operate its business exactly as it has always been run."

Mr. Barnard said, "We look forward to business as usual and continuing with our vision of independent growth of our insurance and reinsurance platforms with the ongoing support of Fairfax."

"The Special Committee of Independent Directors is very pleased to have negotiated a transaction with Fairfax that we believe is highly attractive and in the best interests of the minority stockholders," said Patrick Kenny, chairman of the Special Committee of Odyssey Re.

As soon as is practicable Fairfax said that, through a wholly owned subsidiary, it will commence a tender offer for all of the outstanding shares of common stock of Odyssey Re it does not currently own, for $65 per share in cash.

In addition to customary conditions, the offer will be irrevocably subject to there having been validly tendered and not withdrawn a majority of the outstanding Odyssey Re shares that are held by stockholders that are not affiliated with Odyssey Re (including Fairfax and its subsidiaries and the directors and executive officers of each of Odyssey Re and Fairfax).

The offer will not be subject to a financing condition. Promptly following the offer, Fairfax said it will consummate a second-step merger in accordance with the merger agreement pursuant to which, subject to limited exceptions, non-tendering holders of Odyssey Re common stock would be entitled to receive the price per share paid by Fairfax in the offer.

Following the purchase of shares in the tender offer and subsequent merger, Odyssey Re would become an indirect subsidiary of Fairfax.

Fairfax said it intends to use the $983 million net proceeds from its previously completed public offering of its subordinate voting shares, together with available cash on hand, to fully fund the tender offer and subsequent merger.

Following the successful completion of the tender offer and subsequent merger, Fairfax expects to continue to have in excess of $1 billion in cash and marketable securities at the holding company level.

BofA Merrill Lynch will be the dealer manager for the tender offer. BofA Merrill Lynch is also serving as Fairfax's financial advisor, and Shearman & Sterling LLP and Torys LLP are serving as Fairfax's legal counsel. Sandler O'Neill & Partners, L.P. is serving as the Odyssey Re Special Committee's financial advisor, and Simpson Thacher & Bartlett LLP is serving as that committee's legal counsel.

Odyssey Re Holdings Corp. is a worldwide underwriter of property and casualty treaty and facultative reinsurance, as well as specialty insurance.

Prior to the merger agreement, Fairfax held 72.6 percent interest in Odyssey.