Canadian financial holding group Fairfax has exited its investment in FBD Insurance, an insurance company in Ireland, after the latter agreed to purchase and cancel notes worth €70 million – about SG$111 million. If the notes were exercised, Fairfax would have had the option to acquire a 19% stake in the insurer.
In 2015, Fairfax agreed a €70 million convertible bond deal with FBD. Under the terms of the deal, Fairfax had the authority to convert the bond into 8.2 million ordinary shares in FBD between September 23, 2018 and September 23, 2025, at an exercise price of €8.50.
Earlier this week, FBD said it would pay about €86 million cash for the bond, which was funded through existing cash resources and a new issue of subordinated notes. The Irish Times reported that FBD will issue €50 million in subordinated notes, which will be placed with institutional investors.
The deal is a “great result” for shareholders, said FBD group chief executive Fiona Muldoon, since it avoids any dilution and “ensures that FBD continues to maintain a very strong capital position.”
“Fairfax’s investment in 2015 was a meaningful endorsement of our business when we needed it and they have been a fantastic partner. We wish them well,” Muldoon said in a statement.
FBD also said that the transaction would lower ongoing interest costs, which “should provide increased dividend potential for shareholders” over time.