Fairfax may sell 25 pct of India’s ICICI Lombard in up to $1 bln deal-sources

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By Euan Rocha and Devidutta Tripathy | MUMBAI

MUMBAI Fairfax Financial Holdings is in
early talks to sell 25 percent of India’s largest private
general insurer ICICI Lombard in a deal that could fetch up to
$1 billion, as the Canadian firm looks to cash out and start a
new insurance joint venture, sources familiar with the matter
said.

ICICI Lombard is a joint venture formed in 2001 between
ICICI Bank, India’s second largest bank, and Fairfax,
which is led by Canadian billionaire Prem Watsa.

Fairfax, which owns a 35 percent stake in the venture, has
seen the value of its investment surge over the past five years,
as India’s general insurance market and ICICI Lombard have grown
at a compounded annual rate of over 16 percent. Vehicle
ownership in the country has surged and the market remains
under-penetrated.

Reducing its stake to 10 percent will allow the Canadian
firm to start a new general insurance joint venture in India,
which it aims to do, one of the sources said, adding foreign
investors cannot own more than 10 percent of two insurance
companies, as per Indian regulations.

Private equity firms, including Blackstone Group and
KKR & Co, as well as some Canadian pension funds have
expressed interest in Fairfax’s stake, the sources said.

ICICI may also look to sell a 10 percent stake in the unit
at the same time, one source said. Buyers are likely to pay a
larger premium for a stake in ICICI Lombard if they are able to
get as much as a third of the company, the sources said.

Two sources said a deal is likely to be finalized in the
next two months.

Fairfax may redeploy some of the proceeds to fund its $4.9
billion takeover of Swiss insurer Allied World, a source
said.

ICICI, Fairfax, Blackstone and KKR did not respond to
requests for comment.

The sources, who declined to be named as they are not
authorized to publicly discuss the matter, said discussions are
in the early stages and it was not yet clear what any final deal
would look like.

Fairfax has not yet chosen a bank to run a sale process,
they said.

ICICI Lombard, with an 8.8 percent market share, is a major
player in the vehicle, home, health and travel insurance space
with gross written premiums of $1.2 billion in fiscal 2016.

Fifteen months ago, ICICI Lombard was worth $2.5 billion,
based on the value of a stake ICICI sold to Fairfax at the time.
Now, two of the sources pegged its value at about $4 billion,
while a third said ICICI Lombard is worth about $3.2 billion.

The range puts the value of a 25 percent interest in the
insurer at between $800 million and $1 billion.

NEW INSURANCE VENTURE

Fairfax has already submitted an initial proposal to India’s
insurance industry regulator, IRDA, for a new general insurance
joint venture and met with the regulator this week, three
sources said.

The Canadian firm would be more inclined to proceed with the
ICICI Lombard partial stake sale if it gets a nod from IRDA to
move forward on the venture, the sources said.

Fairfax plans to keep a 45 percent stake in the new venture,
which will initially focus on the travel insurance market, one
of the sources said.

Kamesh Goyal, a former senior executive at Allianz
, would spearhead the new venture and own a 15 percent
stake in it with other investors buying up the rest, the source
said.

The overall initial investment in the venture is likely to
be $50 million, the source said.

Indian regulations allow foreign investors to own up to 49
percent in Indian insurers.



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