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Fairfax to sell 10% stake in Odyssey for $900mn

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Fairfax has entered into an agreement with the Canada Pension Plan Investment Board (CPPIB) and the Ontario Municipal Employees Retirement System (Omers), where each of them will acquire a 4.995% stake in Odyssey Group for an aggregate cash consideration of $900mn.

The proceeds of the transaction will be used to fund a $1bn share repurchasing programme.

Investors reacted positively to the news, with Fairfax shares up 8% in early trading.

Fairfax has close ties with the Canadian pension funds, and has previously divested stakes in its (re)insurance businesses to the long-term investors as a way to free up capital and syndicate risk.

In February this year, Fairfax sold a 14% stake in Brit to Omers for cash proceeds of $375mn.

For the full-year 2020, Odyssey Group reported GWP of $4.3bn and a combined ratio of 95%.

Fairfax will retain the flexibility to repurchase the interests of Omers and CPPIB in Odyssey Group over time.

Following the sale, Fairfax intends to commence a substantial issuer bid to which it will offer to repurchase up to $1bn of its voting shares from shareholders.

Fairfax will repurchase up to a maximum of 2,352,941 shares, or approximately 8.7% of its total issued and outstanding shares. Shareholders will be able to select the price - within the specified range - at which each shareholder is willing to sell all or a portion of their shares, with prices ranging from $425 to $500 per share.

The repurchasing of shares will expire at 5pm ET on 23 December 2021, unless extended or withdrawn by Fairfax.

Closing of the transaction is subject to customary closing conditions and is expected to occur during the fourth quarter of 2021.

The buyback is not conditional upon closing of the Odyssey Group transaction.

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