OMERS, one of the largest Canadian defined benefit pension plans, has entered into an agreement with Fairfax Financial Holdings Limited to acquire a 40% interest in RiverStone UK, Fairfax’s UK run-off group.
Following the transaction, RiverStone UK will benefit from the joint operational expertise of Fairfax and OMERS, providing it with the flexibility to raise inexpensive capital, while at the same time enabling Fairfax to focus on premium growth in the insurance and reinsurance businesses.
The cash purchase price for the investment in RiverStone UK is at least USD 560 million, and will result in Fairfax recording a gain of approximately USD 280 million before tax.
For RiverStone UK, the investment provides additional flexibility to raise capital at historically low rates in Europe in order to opportunistically pursue run-off deals. Following the transaction, Luke Tanzer, Chief Executive Officer (CEO) of RiverStone UK, will remain in his post.
“We welcome OMERS’ investment in RiverStone UK and the opportunity it brings to continue to offer the most trusted and effective run-off solutions in the insurance market,” said Tanzer.
Prem Watsa, Chairman and CEO of Fairfax, added: “When Nick Bentley and Luke Tanzer expressed their desire to take steps to bring partners into the UK run-off business, OMERS was the natural choice given our past successes together. OMERS’ investment and their ability to work jointly with Luke and his team will provide RiverStone UK with the opportunity to prudently leverage the business and pursue opportunistic transactions.”
Ken Miner, Executive Vice President and Global Head of OMERS Capital Markets, commented: “The acquisition of RiverStone UK advances our strategy to make investments that can generate sustainable, stable income and growth. We are excited to work with Fairfax to maximize the value of this asset for our members.”
Post-transaction, Fairfax is to deconsolidate the UK run-off group and also apply equity method of accounting for its remaining interests.
The transaction is expected to close during the first-quarter of next year and remains subject to regulatory approval.
