Fairfax Financial plans to sell its 11% stake in IIFL Finance on the secondary market to generate funds for buying 60% of IDBI Bank from the Indian government and the nation's top insurer. The IDBI Bank transaction is valued at 528.78 billion rupees, while the divestment of the non-bank lender holding is worth approximately 30 billion rupees. Controlling shareholders of IIFL Finance have no plans to buy back the shares, though they are assisting Fairfax in a separate bid to raise its stake in sister firm IIFL Capital Services to 51%.
Key points
Capital from the secondary market share sale will be redirected toward closing one of Ind…: Capital from the secondary market share sale will be redirected toward closing one of India's largest cross-border banking acquisitions.
Fairfax is increasing its ownership in IIFL Capital Services to 51% through an open offer…: Fairfax is increasing its ownership in IIFL Capital Services to 51% through an open offer backed by controlling shareholders.
The investor eventually intends to integrate both IIFL Capital and insurer Digit into IDB…: The investor eventually intends to integrate both IIFL Capital and insurer Digit into IDBI Bank following the takeover.
Sources checked by our analysis pipeline: 1
The sale is intended to unlock funds for Fairfax's purchase of a 60% stake in IDBI Bank from India's federal government and the Asian country's largest insurer. The IDBI deal, valued at 528.78 billion rupees ($5.56 billion), is among India's largest cross-border banking transactions.
To fund part of the deal, Fairfax is looking to complete the IIFL Finance exit "soon", one of the people said.
At the current market price, Fairfax's stake in IIFL Finance will be worth roughly 30 billion rupees or $320 million.
Fairfax will likely sell its stake in the secondary markets and the controlling shareholders of the non-bank lender do not intend to buy the stake, one of the persons said.
Both people declined to be identified as the discussions are confidential.
Fairfax and IIFL did not immediately respond to emails seeking comment.
Fairfax bought a nearly 22% stake in IIFL Finance in 2015, but the stake has since been diluted to 11% following an expansion of the non-bank lender's capital base.
On Tuesday, IIFL Finance said that it would expand its capital base, with US…
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