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$65 Magic Number Is Offered For ORH!


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I believe this now represents a fair offer. It is not a huge price vs current book value, but better than what Mr. Market is willing to pay for ORH. It is also in line with what another reinsurer would likely offer for ORH.


I also believe that this represents a terrific deal for Fairfax when you look at the earnings that Odyssey Re generates, the structural simplification of Fairfax that it will allow (TIG, Fairfax Asia and others), reduced costs (public listing), ratings upgrade that has been received already and new long term friends that have joined with the share issue.


The situation now looks near identical as Northbridge with same premium and same procedure of acquisition except for one detail, Odyssey Re is American.


The only support that they have as of now is Marshfield Associates. They are the largest minority shareholder of ORH with 2.7 million shares, but it is only 17% of these 15-16 million shares. They need 50% of shares to be tendered for the merger to go through. It was something to expect that they would be approached to bless the offer since they are "friends" of Fairfax with one of their former investment manager now working for Hamblin Watsa. Again, I think that the offer is fair and that there is no conflict or anything, but please bear with me.


IMO, due to the appearance of conflict, it is quite possible that a fair bit of noise will come out next week: lawyers looking for a cause, maybe a hedge fund complaining, etc. We know that Fairfax has some enemies. I don't expect the offer to be increased again, but with the latest after hours stock trade at $64.85, it would not take much for ORH to trade above $65 early next week.


Anyway, probably worthwhile to be on alert next week as an Odyssey Re shareholder since selling in the market might turn out better than tendering.



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