Canadian pension OMERS to take $1bn of Allied World alongside Fairfax

by Artemis on January 27, 2017

It’s been confirmed that one of Canada’s largest pension funds, the Ontario Municipal Employees Retirement System (OMERS), is going to contribute $1 billion to the acquisition of insurance and reinsurance group Allied World, alongside Prem Watsa’s Fairfax Financial.

Fairfax and OMERS have entered into an agreement that will see the pension fund indirectly acquire around 21% of Allied World’s shares, simultaneously with the previously announced acquisition of Allied World by Fairfax.

It was reported last week that OMERS could take as much as a $1 billion stake in Allied World, which would help to limit dilution of Fairfax shares.

“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,” Sharon Ludlow, Head of Insurance Investments at OMERS said. “OMERS investment in Allied World is consistent with our strategy to invest in high-quality companies, with strong fundamentals and a track record of value creation.”

“We are excited to be working again with OMERS,” commented Prem Watsa, Chairman and CEO of Fairfax. “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.”

Watsa will seek to further limit the dilution of Fairfax shares and is in ongoing discussions with other potential third-party investors regarding participation in the Allied World acquisition.

By bringing other investors on-board Watsa’s Fairfax will lower its own outlay for Allied World, while minimising the dilution of its shares, but still benefiting by becoming the manager of Allied World’s assets and insurance or reinsurance underwriting capacity.

OMERS continues to display the appetite that large pension funds have for investing in the reinsurance sector with this deal.

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