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Fairfax To Start Tender Offer For Minority Stake In Odyssey Re

BofA Merrill Lynch will be the dealer manager for the tender offer

Fairfax Financial Holdings and Odyssey Re Holdings have signed a merger agreement pursuant to which Fairfax will commence a tender offer to acquire all of the outstanding shares of Odyssey Re (that Fairfax does not currently own) for $65 in cash per share, for approximately $1.0 billion.

The Board of Directors of Odyssey Re, following the recommendation of the Special Committee of Independent Directors of its Board formed to review Fairfax’s proposal, has resolved to recommend that Odyssey Re’s minority stockholders tender their shares in the Fairfax offer. Marshfield Associates, which currently has management and control over approximately 2.7 million shares representing the largest block held by Odyssey Re’s minority stockholders, has agreed to tender the shares over which it has control to Fairfax’s $65 per share offer.

The price of $65 per share in cash represents a 29.8% premium over the closing price on September 4, 2009 (the date on which Fairfax publicly announced that it was proposing to acquire all outstanding shares of common stock of Odyssey Re that Fairfax does not currently own) and a 33.4% premium over the 30-day average closing price for the period ending on September 4, 2009. Based on Odyssey Re’s initial public offering price of $18.00 per share in June 2001, the purchase price represents a compounded annual return of 17.3% through the date of the merger agreement.

Fairfax, through a wholly-owned subsidiary, will commence a tender offer for all of the outstanding shares of common stock of Odyssey Re that Fairfax does not currently own, for $65 per share in cash. In addition to customary conditions, the offer will be irrevocably subject to there having been validly tendered and not withdrawn a majority of the outstanding Odyssey Re shares that are held by stockholders that are not affiliated with Odyssey Re (including Fairfax and its subsidiaries and the directors and executive officers of each of Odyssey Re and Fairfax). The offer will not be subject to a financing condition.

Promptly following the offer, Fairfax will consummate a second-step merger in accordance with the merger agreement pursuant to which, subject to limited exceptions, non-tendering holders of Odyssey Re common stock would be entitled to receive the price per share paid by Fairfax in the offer. Following the purchase of shares in the tender offer and subsequent merger, Odyssey Re would become an indirect subsidiary of Fairfax.

Fairfax intends to use the $983.0 million net proceeds from its previously completed public offering of its subordinate voting shares, together with available cash on hand, to fully fund the tender offer and subsequent merger. Following the successful completion of the tender offer and subsequent merger, Fairfax expects to continue to have in excess of $1 billion in cash and marketable securities at the holding company level.

BofA Merrill Lynch will be the dealer manager for the tender offer. BofA Merrill Lynch is also serving as Fairfax’s financial advisor, and Shearman & Sterling LLP and Torys LLP are serving as Fairfax’s legal counsel.

Sandler O’Neill & Partners, L.P. is serving as the Odyssey Re Special Committee’s financial advisor and Simpson Thacher & Bartlett LLP is serving as that committee’s legal counsel.