Fairfax Financial Holdings Limited has exercised its option to increase the cash consideration element of its offer to acquire Allied World by $18 per ordinary share, which, combined with a $5 special dividend takes the cash consideration component of the offer to $28 per share.
Fairfax and Allied World recently announced that Fairfax had decided to exercise its option to increase the cash consideration, opting to increase this element of the transaction by $18 out of a possible increase of $30 per ordinary share.
“We are pleased to be able to increase the cash consideration component of our cash and stock offer of $54.00 per Allied World ordinary share by $18.00.
“Allied World shareholders will now receive total cash consideration of $28.00 per ordinary share in connection with our transaction and Fairfax will be able to minimize the dilution to Fairfax shareholders, while having the flexibility to buy back the minority investments from OMERS, AIMCo and others over 5-7 years’ time. We are very grateful for the support we have received from our co-investing partners, including OMERS and AIMCo. Thanks to these co-investing partners, our Fairfax shareholders will be happy to know we will not need to issue approximately 3.5 million Fairfax shares, based on the March 9th closing price of our shares,” said Prem Watsa, Chairman and Chief Executive Officer (CEO) of Fairfax.
The Canadian domiciled property & casualty insurance and reinsurance group was able to increase the cash consideration component through $1.6 billion of investments by minority co-investors within the Allied World acquisition vehicle, “that will be approximately 67% owned by Fairfax.”
This includes the previously announced $1 billion contribution from Ontario’s municipal employees’ pension plan, OMERS, and also a $500 million commitment from Alberta Investment Management Corporation.
Scott Carmilani, President, CEO and Chairman of Allied World, also commented on the announcement; “We are excited to be able to present Allied World’s shareholders with an $18.00 increase in the cash component of Fairfax’s offer. By working with Fairfax to provide additional time to increase the cash consideration component of its offer, we were able to maximize the amount of cash our shareholders would receive, making the offer even more attractive.”
Fairfax announced that the increase in the cash consideration will subsequently reduce the “Fixed Value Stock Consideration” under the terms of the previously announced merger agreement.