Fairfax Financial Holdings Ltd. (FFH,FFH.TO) said Wednesday that it has commenced tender offer to acquire the remaining stake in Odyssey Re Holdings Corp. (ORH), which Fairfax does not currently own, for $65 in cash per share. The offer and withdrawal rights are scheduled to expire on October 21.
The offer price of US$65 per share in cash represents a 29.8% premium over the closing price on September 4, and a 33.4% premium over the 30-day average closing price for the period ending September 4. Based on Odyssey Re's initial public offering price of US$18.00 per share in June 2001, the purchase price represents a compounded annual return of 17.3% through the date of the merger agreement.
In September, Fairfax, which own about 72.6% stake in Odyssey Re, proposed to acquire the remaining shares of common stock of Odyssey Re for US$60 per share in cash. The offer represented a 19.8% premium over today's closing price and a 23.2% premium over the 30-day average closing price.
The board of Odyssey Re recommended Odyssey Re's minority stockholders to tender their shares in the Fairfax offer. Marshfield Associates Inc., which currently owns about 2.7 million shares of Odyssey Re has also agreed to tender the shares over which it has control to Fairfax's US$65 per share offer.
Fairfax plans to fund the merger with the US$983.0 million net proceeds from its previously completed public offering of its subordinate voting shares, together with available cash on hand. Upon the successful completion of the tender offer and subsequent merger, Fairfax expects to continue to have in excess of US$1 billion in cash and marketable securities at the holding company level.
Fairfax has also filed a preliminary short form base shelf prospectus with the Canadian securities regulatory authorities, related to the merger. The shelf prospectus will allow Fairfax to offer from time to time over a 25-month period up to US$2.0 billion of debt, equity or other securities.
The filing is intended to restore the capacity which was available to Fairfax prior to its recent offering of subordinate voting shares which closed on September 11. The US$2.0 billion maximum also represents an increase of US$1.0 billion in total capacity, which is consistent with Fairfax's increased market capitalization and will provide Fairfax with additional financial flexibility.
Upon the completion of the transaction, there would not be any change in the operational strategy and management structure of Odyssey Re. Odyssey Re will continue to operate its business under the leadership of its president and chief executive officer, Andy Barnard.
FFH closed Wednesday's regular trading session at US$374.00, down US$4.78 or 1.26%. FFH.TO ended Wednesday's regular trading session at C$402.90, down C$2.02.
ORH finished Wednesday's regular trading session at US$64.61, down 1 cent. In the after-hours, the shares gained 2 cents.
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