UPDATE 2-Greece's Eurobank sells insurance unit to Fairfax for 316 mln euros

Tue Dec 22, 2015 1:55pm EST
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(Adds details on deal, background on companies, analyst comment)

By George Georgiopoulos and Euan Rocha

ATHENS/TORONTO Dec 22 (Reuters) - Greece's third-largest lender Eurobank agreed to sell an 80 percent stake in its Eurolife ERB insurance subsidiary to Canada's Fairfax Financial Holdings Ltd for 316 million euros ($345 million) on Tuesday, deepening ties between the two firms.

Toronto-based investment holding firm Fairfax, led by well known contrarian investor Prem Watsa has made some large bets on a Greek recovery, and it already owns a 17 percent stake in the Greek bank after participating in a new recapitalization round last month.

RBC analyst Mark Dwelle noted that the business being bought by Fairfax looks like a profitable franchise and one which will not require either capital or management attention in order to contribute positive results.

"This is the type of opportunistic acquisitions Fairfax has done repeatedly over the years - acquiring a good franchise that wouldn't normally even come to market, at a fair price by being able to be a fast, fair and friendly acquiring partner," said Dwelle, in a note to clients on Tuesday, adding that Fairfax's familiarity with the acquired company's management team is a bonus.

The cash deal is in line with Eurobank's strategy of slowly exiting from non-banking operations to focus on core banking. It also complies with a restructuring plan approved by the European Commission. Eurobank will retain a 20 percent stake in Eurolife.

The sale will also lift Eurobank's core tier 1 capital ratio by about 26 basis points to 17.8 percent, according to the bank.

Eurolife is the third largest insurer in Greece with a market share of about 10 percent, providing life and non-life insurance products. It distributes its insurance products and services through Eurobank's network in Greece and Romania.   Continued...