Fairfax Financial Holdings Ltd., through its subsidiaries, will invest up to C$100 million in Westaim Corp. in exchange for the issuance by Westaim of 5% interest-bearing preferred securities and common share purchase warrants.
Fairfax has agreed to subscribe, on a private placement basis and subject to certain conditions, for preferred securities in an aggregate amount of up to C$100 million. Westaim plans to close an initial subscription of C$50 million, and has discretion with respect to additional subscriptions by Fairfax to close additional subscriptions for the remaining C$50 million in minimum tranches of C$25 million by no later than Dec. 31.
Westaim may redeem the preferred securities at any time after five years from closing, or after three years if its common shares are trading at a price of at least C$5.60 per share.
Westaim will also issue 28,571,430 warrants, exercisable at C$3.50 per share. The warrants will vest proportionately based on the aggregate amount of preferred securities drawn by Westaim under the private placement. Each vested warrant will be exercisable within five years, but may be extended to seven years if the closing price of the Westaim common shares is less than C$5.60 on the fifth anniversary of the initial closing. Westaim can also elect to require early exercise of the warrants if the closing price of its common shares reaches C$5.60 at any time after the third anniversary of the initial closing.
Fairfax will also make an investment of up to US$500 million through Arena Investors LP, an affiliate of Westaim.
Fairfax will invest an initial US$125 million with Arena Investors after Westaim's drawdown of the first tranche of C$50 million of preferred securities. Fairfax may invest an additional US$125 million with Arena Investors upon the next C$25 million drawdown of preferred securities, and an additional US$250 million upon the final C$25 million drawdown.
Westaim will use the net proceeds for potential acquisitions and for general corporate purposes. Fairfax will have the right to nominate one director to Westaim's board.