Insurance and investment company Fairfax Financial Holdings Ltd. is selling down one third of its stake in the Bank of Ireland, a transaction that has become a model for its other investments in distressed countries.
Fairfax's chief executive officer and founder Prem Watsa led a consortium of investors to take a 35-per-cent stake in the bank in 2011, then worth $1.5-billion. The move saved Bank of Ireland from nationalization. The government of Ireland took a minority stake, which it maintains today.
Before the consortium, which includes famed U.S. billionaire Wilbur Ross, stepped in, the bank was in trouble. Ireland's economy was struggling under the weight of a commercial and residential real estate market that bust in 2007, and shares of the bank had plummeted from about €12 euros ($16.52 U.S.) to about 11 euro cents by the summer of that year. Today, Bank of Ireland stock trades at about 35 euro cents.
Mr. Ross is also selling one-third of his stake alongside Fairfax.
On Tuesday, Mr. Ross and Fairfax began selling a combined 6.4-per-cent stake in Bank of Ireland, the country's biggest and oldest lender.
Paul Rivett, president of Fairfax, called the Bank of Ireland one of his firm's most successful investments and attributed the stock sale to the need to rebalance portfolios now that the position had become so large.
Mr. Rivett said Fairfax continues to be a long-term supporter of both the bank, and its CEO Richie Boucher.
Fairfax has used its Irish stake as a model for other investments in distressed countries and companies.
Mr. Watsa has compared the deal to his proposed $9-per-share bid for Waterloo, Ont.-based smartphone maker BlackBerry Ltd. Fairfax and a consortium of investors made a bid to take the company public last year, but wound up investing $1.25-billion in convertible debentures instead. Fairfax contributed $500-million.
Back in 2011, Fairfax and Mr. Ross each invested €300-million in the Bank of Ireland. Those stakes have tripled in value in the last few years. Boston-based Fidelity Investments, investment manager The Capital Group and real estate investment firm Kennedy Wilson also took on significant stakes, but they are not part of Tuesday's sale.
In both the case of BlackBerry and the bank, Fairfax stepped in to provide financing at a time other investors were extremely jittery.
"The market's very emotional," Mr. Watsa told the Globe and Mail at the time of the BlackBerry deal. "You'll find huge optimism when everything's going well, huge pessimism when things are not working out as well. And what we say is the truth is in between."
Mr. Rivett has compared the investment climate in Greece to that of Ireland a few years ago. Fairfax has invested in real estate as well as a mining and energy company in the country.
"Much like with Bank of Ireland, the current situation in Greece has tarred all companies, even good ones, with the same brush," Mr. Rivett said at the time. "There are many great companies trading at historically low multiples."
With a file from Reuters