Fairfax plans IIFL Finance exit to fund IDBI Bank bid

Synopsis Fairfax Financial Holdings plans to exit IIFL Finance to fund its IDBI Bank acquisition. The investor will use proceeds to part-fund the proposed takeover of the state-owned lender. Fairfax intends to merge CSB Bank with IDBI Bank after completing the acquisition. This move aims to simplify lending interests and avoid business overlaps. The deal is expected to be completed shortly after procedural steps. IANS Fairfax Financial Chairman and CEO Prem Watsa Mumbai: Prem Watsa-backed Fairfax Financial Holdings is likely to exit IIFL Finance and use the proceeds to part-fund the proposed acquisition of IDBI Bank, multiple people familiar with the Canadian investor's plans told ET. They said Fairfax has informed the government that it plans to merge CSB Bank with IDBI Bank once it succeeds in its bid to takeover the state-owned lender, billed as the biggest overseas M&A in Indian banking.Fairfax plans to sell its remaining stake of about 13.7% in IIFL Finance, for which the Canadian investor is in discussions with at least four private-equity investors for the stake, said the people cited above. Bloomberg had earlier reported Blackstone Inc is in the fray to buy a stake in IIFL Finance. Fairfax did not respond to queries until the publication of this report, while IIFL Finance declined to comment. At IIFL Finance's current market capitalisation of about ₹27,700 crore, Fairfax's remaining holding could be worth around ₹3,800 crore, or nearly $400 million, before any negotiated premium or discount is offered to potential buyers.Fairfax held 15.18% in IIFL Finance at the end of June but sold a 1.49% stake to Capital Group entities for ₹374 crore in July, reducing its holding to about 13.69%. Also Read | Fairfax to exit IIFL Finance before likely IDBI Bank deal; Blackstone emerges as suitor Through the proposed exit, Fairfax plans to simplify its lending interests after acquiring IDBI Bank and avoid overlaps between the businesses. Fairfax is the frontrunner to acquire a combined 60.7% IDBI Bank stake from the Centre and Life Insurance Corp. Sources said Watsa could pay ₹81 per share for the lender, taking the total deal to roughly ₹53,000 crore, or $5.5 billion."The deal was effectively sealed after the finance minister's recent visit to Canada. The remaining procedural steps, including the formal notification and share-purchase agreement, are expected to be completed shortly," said a person aware of the IDBI Bank divestment. Fairfax also owns 40% of CSB Bank. Unified LicenceInstead of selling that holding, Fairfax now plans to merge CSB with IDBI Bank after completing the acquisition, the people said. "Fairfax had earlier explored a sale of its CSB Bank stake but did not receive valuations that reflected the capital it had invested in the lender," a person in the know said. "A merger would allow Fairfax to retain the franchise while operating the two businesses under a single banking licence." The Canadian investor is also looking to consolidate IIFL Capital Services with the wider IDBI Bank platform, giving the lender access to businesses spanning wealth management, broking, investment banking and capital markets.