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Fairfax looks to take Singapore Re fully private under 100% ownership

22nd March 2021 - Author: Luke Gallin

Fairfax Asia Limited, the Asian holding company for operating entities of Fairfax Group in the region, has made a voluntary conditional cash offer to acquire all of the issued and paid-up ordinary shares in the capital of Singapore Reinsurance Company Limited.

fairfax-financial-logoFairfax, which alongside the concert group currently owns 28.18% of the reinsurer, is looking to purchase an additional 71.82% of the total issued shares of Singapore Re for $35.35 cents per share.

The offer represents a premium of 20.6%, 20.6%, 21.9%, and 27.6% over the volume-weighted average price per share for the one, three, six, and 12-month periods, respectively up to and including March 18th.

The intention of Fairfax is to gain majority control of the company and then delist it off the Singapore Exchange (SGX), taking it fully private.

An announcement on the offer explains that if the percentage of the total number of issued shares held in public hands fall below 10% (Free Float Requirement), the SGX can suspend the trading of all shares and subsequently delist them.

However, for Fairfax, the aim is to gain 100% ownership and as such, in the event that the Free Float Requirement is not met, Fairfax does not intend to preserve the listing status of Singapore Re nor does it intend to undertake or support any action to satisfy the Free Float Requirement.

Singapore Re’s annual returns on shareholders’ equity averaged roughly 4.7%, 3.5% and 1.9% for the past 10, 5, and 1 financial years, respectively.

Fairfax attributes this decline in performance to a combination of steep competition, a lack of scale, increasing volatility of underwriting performance and rising exposure to natural catastrophe events.

The recent dip in performance at Singapore Re resulted in A.M. Best revising its outlook for the firm to negative back in November of 2020.

By obtaining statutory control, Fairfax notes that it may be able to enhance its already strong position in the Asian insurance and reinsurance markets by establishing complementary business operations within the Group via sharing both customer and cedent relationships.

Furthermore, Fairfax plans to continue to develop and grow its businesses and seek opportunities on a long-term sustainable basis.

At the same time, Fairfax says that it plans to explore opportunities for cost synergies such as shared services, where appropriate. Importantly, Fairfax adds that it has no intentions to introduce any major changes to the existing Singapore Re business; to re-deploy fixed assets of the reinsurer; or to discontinue the employment of the existing employees of the Group, other than in the ordinary course of business.

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