Canada Pension Plan Investment Board’s credit arm and OMERS have agreed to buy a minority stake in Odyssey Group Holdings, a US-based reinsurance and insurance company. CPPIB and OMERS will acquire the interest for $900 million in cash. The seller in Odyssey’s Canadian parent organization, Fairfax Financial Holdings.
TORONTO, Nov. 17, 2021 (GLOBE NEWSWIRE) — Fairfax Financial Holdings Limited (“Fairfax” or the “Company”) (TSX: FFH and FFH.U) announces its intention to commence a substantial issuer bid (the “Offer”), pursuant to which the Company will offer to repurchase for cancellation up to US$1.0 billion of its subordinate voting shares (the “Shares”) from shareholders for cash. Fairfax also announces that it has entered into an agreement with an affiliate of CPPIB Credit Investments Inc. (“CPPIB Credit Investments”), a wholly-owned subsidiary of Canada Pension Plan Investment Board, and OMERS, the defined benefit pension plan for Ontario’s municipal sector employees pursuant to which each of CPPIB Credit Investments and OMERS will acquire 100% of a new series of securities representing a 4.995% interest in Odyssey Group Holdings, Inc. (“Odyssey Group”), Fairfax’s U.S. based reinsurance and insurance subsidiary, for an aggregate cash purchase price of US$900.0 million (the “Odyssey Group Transaction”). After closing, Fairfax will retain the flexibility to repurchase the interests of OMERS and CPPIB Credit Investments in Odyssey Group over time.
The Offer will proceed by way of a “modified Dutch auction”, which allows shareholders to select the price, within the specified range, at which each shareholder is willing to sell all or a portion of their Shares. The Offer prices range from US$425.00 to US$500.00 per Share (in increments of US$5.00 per Share). The Offer will be for up to a maximum of 2,352,941 Shares, or approximately 8.72% of Fairfax’s 26,986,170 total issued and outstanding Shares, based on full participation and a purchase price equal to the minimum purchase price per Share.
Shareholders who wish to participate in the Offer will be able to do so through (i) auction tenders in which they will specify the number of Shares being tendered at a price of not less than US$425.00 and not more than US$500.00 per Share, in increments of US$5.00 per Share; or (ii) purchase price tenders in which they will not specify a price per Share, but rather, will agree to have a specified number of Shares purchased at the purchase price to be determined by auction tenders. Shareholders who validly deposit Shares without specifying the method in which they are tendering their Shares will be deemed to have made a purchase price tender. Fairfax has been informed by Mr. Watsa that he, and entities controlled by him, will not deposit any Shares owned or controlled by him pursuant to the Offer (including, for greater certainty, in respect of any Shares into which multiple voting shares of Fairfax controlled by Mr. Watsa are convertible).
Upon expiry of the Offer, Fairfax will determine the lowest purchase price (which will not be more than US$500.00 per Share and not less than US$425.00 per Share) that will allow the Company to purchase the maximum number of Shares properly tendered to the Offer, and not properly withdrawn, having an aggregate purchase price not exceeding US$1.0 billion.
If Shares with an aggregate purchase price of more than US$1.0 billion are properly tendered and not properly withdrawn, Fairfax will purchase the tendered Shares on a pro rata basis after giving effect to “odd lot” tenders (of shareholders beneficially owning fewer than 100 Shares), which will not be subject to proration. In that case, all Shares tendered at or below the finally determined purchase price will be purchased, subject to proration, at the same purchase price determined pursuant to the terms of the Offer. Shares that are not purchased, including Shares tendered pursuant to auction tenders at prices above the purchase price, will be returned to shareholders.
The Offer will expire at 5:00 p.m. (Eastern time) on December 23, 2021, unless the Offer is extended or withdrawn by Fairfax. The Offer will not be conditional upon any minimum number of Shares being tendered. The Offer will, however, be subject to other conditions and Fairfax will reserve the right, subject to applicable laws, to withdraw or amend the Offer, if, at any time prior to the payment of deposited Shares, certain events occur. Fairfax intends to use the proceeds of the Odyssey Group Transaction and other available cash resources to fund the purchase of Shares under the Offer, however, the Offer is not conditional upon closing of the Odyssey Group Transaction.
Details of the Offer, including instructions for tendering Shares, will be included in the formal offer to purchase and issuer bid circular, letter of transmittal, notice of guaranteed delivery and other related documents (the “Offer Documents”). The Offer Documents will be mailed to shareholders and will be filed on or about November 18, 2021 with the applicable Canadian securities regulatory authorities and made available without charge on SEDAR at www.sedar.com, filed on a Schedule 13E-4F with the U.S. Securities and Exchange Commission and made available without charge on EDGAR at www.sec.gov.
Neither Fairfax nor its Board of Directors makes any recommendation to shareholders as to whether to tender or refrain from tendering any or all of their Shares to the Offer or as to the purchase price or prices at which shareholders may choose to tender Shares. Shareholders are urged to read the Offer Documents carefully and in their entirety, and to consult their own financial, tax and legal advisors and to make their own decisions with respect to participation in the Offer.
Any questions or requests for assistance in tendering Shares to the Offer may be directed to Computershare Investor Services Inc., the depositary for the Offer. Fairfax has engaged Scotiabank to act as exclusive financial advisor in respect of the Offer.
Odyssey Group Transaction
Pursuant to the Odyssey Group Transaction, each of OMERS and CPPIB Credit Investments will acquire a 4.995% interest in Odyssey Group. Following the closing of the Odyssey Group Transaction, Fairfax will have the flexibility to repurchase the interests of OMERS and CPPIB Credit Investments in Odyssey Group over time. Closing of the Odyssey Group Transaction is subject to customary closing conditions and is expected to occur during the fourth quarter of 2021. Proceeds from the Odyssey Group Transaction will be used by Fairfax to fund the purchase of Shares pursuant to the Offer. Closing of the Odyssey Group Transaction is not conditional upon the closing of the Offer or any minimum number of Shares being acquired in the Offer and the Offer is not conditional upon the closing of the Odyssey Group Transaction.
Fairfax is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management.