FFH announces $1 billion US in shares to be offered at $347 US each

[Granitepost]

See: http://ca.news.finance.yahoo.com/s/08092009/28/link-f-ccnmatthews-fairfax-raise-1-billion-equity-offering.html for details.

[Cardboard]

Wow! What a great price! This should calm some fears from FFH shareholders.  ;D

 

No wonder now why they came out with this process of issuing shares instead of swapping FFH for ORH. It has paid out handsomely to pay a little more interest than what was necessary on this recent $400 million CAD debt issue.

 

See now why I say it is important to maintain good business relationships? The benefits are simply enormous. And now you think that Prem will short cut friends such as Marshfield & Associates?

 

Cardboard

[Partner24]

Frankly, I don't like the idea of diluting my ownership in FFH for less than the intrinsic value of the Fairfax shares, unless what we get in return is also attractive. Because of the intrinsic value per share dilution that we'll basicaly have as a basic consequence, I would be really surprised if FFH increase it's ORH offering price materialy.

 

Cheers!

[valuecfa]

Farifax plays game of chicken:

 

Fairfax Financial Holdings Ltd. (FFH) announced plans to sell $1 billion in stock as it bulks up financing for its proposed $965 million acquisition of the rest of rival insurer Odyssey Re Holdings Corp. (ORH).

Fairfax plans to sell 2.9 million shares at $347, its closing price Friday on the New York Stock Exchange. The shares also trade in Toronto, where the insurance holding company is based.

Fairfax, which currently holds 73% of Odyssey, late Friday announced it was offering $60 a share for the remaining stake. Odyssey on Tuesday said it was reviewing the bid. Its shares jumped 25% premarket to $62.50.

If the acquisition isn't completed, Fairfax plans to use the proceeds to boost its cash position, increase short-term investments, retire debt and other corporate purposes.

Fairfax's businesses include property and casualty insurance, reinsurance and investment management.

 

Like Fairfax is going to issue $1 billion in undervalued shares just to retire some debt, make short-term investments, and boost cash position. A little bit of posturing here if you ask me. I think they are realizing ORH shareholders aren't that happy with the offer price. Even at a current share price of $62.50 (above offering price) there is not much selling pressure. I will be very interested to see what the independent special committee comes up with.