Fairfax unveils Odyssey bid

Fairfax Financial Holdings has announced its plan to acquire the remaining shares of Odyssey Re Holdings, which it does not already own, in a bid to take the U.S.-based re-insurance firm private again.

The offer of $60 per share represents a premium of 23% over the 30-day average closing price. To fund the purchase, Fairfax will issue new stock under its existing shelf prospectus. After the purchase, the firm expects to hold over $1 billion in cash and marketable securities.

“Our offering price, which is well above any price at which Odyssey Re shares have ever traded, represents an attractive opportunity for Odyssey Re shareholders to obtain liquidity at a significant premium to the market price and to the valuation of Odyssey Re’s peer group,” said Prem Watsa, chair and CEO of Fairfax. “Following completion of the transaction, Odyssey Re would have the benefit of the strong financial position and financial flexibility of Fairfax as its business continues to move forward.”

Fairfax has said it does not plan to make changes to the management of Odyssey.

The U.S. re-insurer was sold off by Fairfax in 2001, and is made possible by the large bets against the financial services sector that Watsa made during the inflation of the credit bubble. At the time, Watsa was scorned as missing the boat.

When the credit markets seized and financial institutions began to unravel, Watsa’s insight was proven correct.

Earlier this year, Fairfax bought back commercial property and casualty insurer Northbridge Financial, which had also been sold off by the company during leaner years.

(09/09/09)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.