Fairfax to Sell Shares to Fund Repurchase of Odyssey Re

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Fairfax Financial Holdings Ltd. said Tuesday it will sell $1 billion in stock to fund the purchase of the Odyssey Re Holdings Corp shares that it does not already own. [IJ Note: Neither Standard & Poor’s nor A.M. Best expect the repurchase to trigger changes in Fairfax’ ratings – see related article article at: https://www.insurancejournal.com/news/international/2009/09/09/103605.htm].

Fairfax, which reduced its stake in the reinsurer a few years ago to raise money, will sell 2.88 million shares at $347 each to fund the reacquisition. Fairfax shares closed at that price on Sept. 4 in New York.

Fairfax already owns about 73 percent of Connecticut-based Odyssey Re. It said last week it would buy the remaining shares for $60 each, a premium of about 20 percent over the price at the time of the announcement.

Shares of Odyssey Re, which closed at $50.07 on Friday, surged to $62.35, while Fairfax shares fell C$8.57 [US$7.93] to C$369.36 [US$341.85] in Toronto.

U.S. and Canadian markets were closed on Monday.

Fairfax, a financial services holding company with subsidiaries in property and casualty insurance, reinsurance and investment management, said there would be no changes in Odyssey Re’s strategic or operating philosophy under the deal.

If the deal does not go through, Fairfax will use the money to build its cash position, increase short-term investments and marketable securities, retire outstanding debt and for general corporate purposes.

Fairfax said it had entered into an agreement with a syndicate of underwriters co-led by CIBC, which will be the sole bookrunner, Bank of America Merrill Lynch and Scotia Capital, for the $1 billion offering.

The underwriting syndicate also includes BMO Capital Markets, RBC Capital Markets, Cormark Securites, GMP Securities and Citigroup, the company said.

($1=$1.07 Canadian)

(Reporting by Andrea Hopkins in Toronto and R. Manikandan in Bangalore)