bought back US$1-billion of its own stock at a premium price on Christmas Eve, after selling a stake in a subsidiary for US$900-million to institutional investors OMERS and the Canada Pension Plan Investment Board.
Toronto-based Fairfax set the purchase price on its buyback last Friday using a “modified Dutch auction”, which allows shareholders to select the price they are willing to tender their stock. The auction was “modestly oversubscribed,” according to a report by analyst Phil Hardie at Scotiabank. The CPPIB and OMERS investment valued Odyssey at 1.7 times its book value. In contrast, the buyback saw Fairfax repurchase its own shares at a 10 per cent discount to the company’s reported book value, which is US$561.88 per share. Mr. Hardie said: “The Odyssey deal highlights the significant gap between Fairfax’s stock price and the estimated intrinsic value of the company and its holdings.”