Fairfax Africa has agreed to invest a minimum of $130m in Atlas Mara as part of a broader strategic investment announced by Atlas Mara.

"We share the vision of Atlas Mara to create a leading pan-African financial services platform in key growth markets in sub-Saharan Africa," said Michael Wilkerson, CEO of Fairfax Africa, 

"We are delighted to enter into this strategic partnership with Atlas Mara, and to help strengthen and grow its existing and profitable network across seven countries in Africa. We believe this attractive investment represents substantial value creation potential for Fairfax Africa shareholders, and we look forward to working closely with Bob Diamond and the Atlas Mara team to successfully build upon the foundation laid over the past three years,” he said.

The aggregate Atlas Mara strategic investment will be used to support its growth initiatives and will be anchored by new capital from Fairfax Africa and existing shareholders of Atlas Mara.

The investment comprised of a $100m equity offering of new ordinary shares at a price of $2.25 per share.

Qualifying existing Atlas Mara shareholders will be invited to participate in the equity offering by way of an open offer alongside Fairfax Africa, which will serve as the committed underwriter of the equity offering. 

Fairfax Africa will have the right to secure a minimum of 30% of the equity offering. 

Any shares not taken up by qualifying existing Atlas Mara shareholders will be subscribed for by Fairfax Africa; and a $100m mandatory convertible bond to be issued to Fairfax Africa, which will convert into new ordinary shares at the Issue Price upon the closing of the open offer. 

The agreed Issue Price of $2.25 represents implied purchase price multiples of 0.33x Book Value, 0.42x Tangible Book Value, 8.7x LTM EPS and 6.4x Normalized LTM EPS (excluding one-time charges and other non-recurring items).

Upon conversion of the mandatory convertible bond and participation in the equity offering, Fairfax Africa is expected to have a total shareholding of at least 35%, but in any event less than 50% of the total voting rights in Atlas Mara. 

Fairfax Africa will nominate four directors to the board of directors of Atlas Mara out of a total of nine directors. 

The strategic investment is subject to shareholder approval at an upcoming extraordinary general meeting of Atlas Mara.

The aggregate proceeds of the strategic investment are primarily intended to be used to support Atlas Mara's commitment to Union Bank of Nigeria (UBN) and Nigeria via: the funding of Atlas Mara's acquisition of an indirect 13.4% shareholding in UBN; the funding of Atlas Mara's subscription for its pro rata entitlements under the forthcoming rights issue announced by UBN; and further expanding Atlas Mara's strategic business lines of Markets and Treasury and FinTech.

"We believe strongly in the long-term growth of good businesses in Africa", said Prem Watsa, Chairman of Fairfax Africa. 

"Banks are at the forefront of economic development in sub-Saharan Africa and Atlas Mara represents a unique opportunity to invest in many profitable banks in the region at a very attractive valuation,” he said.