Fairfax raises US$1 billion to acquire Odyssey Re’s outstanding common stock

Fairfax Financial Holdings Limited (TSX and NYSE: FFH) has received commitments for the purchase of US$1 billion of its subordinate voting shares, which will be used to fund the proposed acquisition of all of the outstanding shares of common stock of Odyssey Re Holdings (ORH) Corp. The offering is expected to close on or about Sept. 11, 2009. Fairfax currently owns approximately 72.6% of all outstanding shares of common stock of Odyssey Re.”The purchase price represents a multiple of 1.16xOdyssey Re’s book value per share as of June 30, 2009 as compared to an average multiple of approximately0.91x for a group of reinsurance peers as of the same date,” the company said in a press release.“Our offering price [at $60 per share], 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 Fairfax chairman and CEO Prem Watsa. There is no guarantee the acquisition of Odyssey Re will be completed, Fairfax notes. The proposal is currently under review by an independent special committee of Odyssey Re’s board of directors.Fairfax said “there would be no changes in Odyssey Re’s strategic or operating philosophy” as a result of its proposed acquisition. “Under the leadership of Andy Bernard, president and CEO, Odyssey Re will continue to operate its business exactly as it has always been run, on an independent and decentralized basis.”Commenting on the proposed acquisition, ratings agency A.M. Best said it believes Odyssey Re’s business strategy “is not expected to change in a meaningful way” as the result of a proposed acquisition.”Given the historic majority ownership of ORH by Fairfax, A.M. Best also believes that integration risk should not be a significant issue going forward.”