Fairfax lines up US$1 billion from Ontario pension fund for Allied World deal

TORONTO – Ontario pension fund manager OMERS will invest US$1 billion in support of a takeover of the Allied World Assurance by Fairfax Financial Holdings Ltd. (TSX:FFH) announced late last year.

OMERS and Fairfax said Friday the pension fund manager has agreed to indirectly acquire a roughly 21 per stake in Allied World, subject to certain regulatory approvals.

Fairfax said it’s also in discussions with several other parties about participating in the Allied World investment.

Toronto-based Fairfax — which owns a variety of property and casualty insurers, among other things — announced an agreement last month to acquire the Swiss insurer for US$4.9 billion in cash and stock.

Under the deal, Allied World shareholders will receive US$54 per share from Fairfax in a combination of cash and shares plus a $5 cash dividend from Allied World.

Fairfax chairman and CEO Prem Watsa said the OMERS investment will allow his company to increase the cash component of the offer to Allied World shareholders.

Watsa told analysts on Dec. 19 that he views Allied World as “the largest and the best company Fairfax has purchased over 31 years.”

In a joint statement issued with Fairfax, Sharon Ludlow of OMERS said Allied World is “highly complementary” to Fairfax’s existing operations and consistent with the OMERS investment strategy.

OMERS, which administers pensions for 461,000 members from municipalities, school boards, emergency services and local agencies across Ontario, had more than $77 billion in net assets under management as of Dec. 31.