It’s been confirmed that OMERS, Ontario’s municipal employees’ pension plan has agreed to contribute $1 billion to the acquisition of Allied World alongside Fairfax Financial. The contribution will see OMERS indirectly acquire approximately 21% of insurer and reinsurer Allied World’s shares.
Fairfax had announced mid-December it would purchase Allied World for $4.9 billion after the pair had entered into a merger agreement – which would see the group’s access into key U.S. markets deepen and bring $9.4 billion of assets to Fairfax, adding significant scale to Fairfax Chief Executive Officer (CEO), Prem Watsa’s Warren Buffett style investment strategy.
Head of Insurance Investments at OMERS, Sharon Ludlow, said; “We are pleased to be investing in Allied World. Allied World is a market leading global property, casualty and specialty insurer and reinsurer, and is highly complementary to Fairfax’s existing worldwide operations.”
Ludlow added that OMERS’ investment in Allied World was consistent with the company’s strategy to invest in high-quality long-term investor companies.
Prem Watsa, Chairman and CEO of Fairfax, said; “We are excited to be working again with OMERS, OMERS is a proven, long-term investor and the commitment by it will allow us to increase the cash component of our US$54.00 per share offer to Allied World shareholders and gives us the flexibility to potentially buy back their interest over 5-7 years’ time.”
Fairfax Financial is often said to have Berkshire Hathaway ambitions, with the premium float based investment style a key strategy of the firm.
Fairfax is in ongoing discussions with several additional third parties to participate in the Allied World investment, additional parties will be announced if and as negotiations are satisfactorily concluded.
The transaction remains subject to a number of regulatory and certain Allied World shareholder approvals.