August 11, 2015 / 12:13 PM / 2 years ago

Fairfax alters Watsa voting-stake plan after shareholder talks

TORONTO (Reuters) - Canada’s Fairfax Financial Holdings Ltd (FFH.TO) said on Tuesday it has added investor safeguards to a plan to preserve founder Prem Watsa’s voting stake, a move aimed at assuaging the concerns of minority shareholders who had opposed the proposal.

The plan, which must be put to a shareholder vote, would ensure that the family of Watsa, who is Fairfax’s chairman and chief executive, maintains at least 41.8 percent voting control via the multiple voting shares it owns.

The Toronto-based investment management and insurance company said the proposal will help prevent a takeover and safeguard its culture.

The plan has been opposed by two of Canada’s top pension fund managers, Canada Pension Plan Investment Board and British Columbia Investment Management Corp. They have said it would not treat all shareholders equally and would extend Fairfax’s dual class share structure indefinitely.

Fairfax said on Tuesday the new safeguards - put in place in response to talks with “certain significant institutional investors” - include provisions for additional ratification votes by minority shareholders in certain circumstances.

It said the firms it has been in talks with, as well as other major institutions, have advised Fairfax that they now intend to back the proposal.

Fairfax postponed a special meeting to vote on the plan for a second time to give shareholders time to consider the modifications. The meeting, initially scheduled for July 21 and postponed to Aug. 13, will now be held on Aug. 24.

When Fairfax delayed the initial vote last month, it said the postponement would give management time to continue discussions with investors.

Watsa has built and run Fairfax for over three decades, and some large shareholders have publicly supported the plan to preserve the family voting stake.

Watsa, a famed contrarian investor often dubbed “Canada’s Warren Buffett”, has shepherded Fairfax since 1985, when the stock traded at C$5 a share. Its shares rose C$1.53 to C$612.01 on the Toronto Stock Exchange on Tuesday.

The company has grown via acquisitions and prides itself on a decentralized approach that it says attracts strong partners and management teams that can run subsidiaries by themselves.

Fairfax said its plan would allow it to issue shares to finance growth without further diluting Watsa’s control. He has long pledged never to sell his voting shares, making it clear that investors should not invest in the hopes of a takeover premium.

Additional reporting by Amrutha Gayathri in Bengaluru; Editing by Kirti Pandey, Jeffrey Hodgson and Peter Galloway

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