Canada's Fairfax Financial buys American Safety Insurance for $306 mn
04 June 2013
Canadian insurance group Fairfax Financial Services has agreed to buy American Safety Insurance Holdings Ltd, a company that covers specialty risks, for approximately $306 million, aiming to expand its specialty insurance business.
Under the terms, Fairfax will buy all the outstanding shares of American Safety by paying $29.25 per share in cash. The offer price represents a 22-per cent premium to the closing price of American Safety stock on 31 May, the last trading day prior to the announcement of the deal, Fairfax said in a statement.
Further to the news, shares in American Safety jumped nearly 21 per cent to close at $28.91 yesterday in New York.
Bermuda-based American Safety targets underserved specialty risks through US-based program administrator American Safety Insurance Services Inc and its subsidiaries US Insurance and Bermuda Reinsurance.
Fairfax chairman and chief executive officer Prem Watsa said, ''We expect to enhance our insurance operations in certain specialty lines of business with American Safety's expertise."
Some directors and executives of American Safety, who own about 10-per cent stake in the company, have agreed to vote in favour of the proposed merger.
The transaction is expected to close in the fourth quarter, subject to customary closing conditions including shareholders' and regulatory approvals.
Simultaneously, Fairfax has agreed to sell the Bermuda subsidiary, American Safety Reinsurance Ltd, to insurance provider Tower Group International Ltd, immediately after closing the deal, subject to required approvals.
The purchase is expected to be financed through internal resources. The deal will give Fairfax $480 million of additional investible assets, the company said.
Further to the merger, Fairfax expects several of the American Safety specialty lines groups to move to Fairfax subsidiary Crum & Forster and Hudson Insurance Group,American Safety's president and chief executive officer Stephen Crim said, ''Our specialty insurance platform will fit well into subsidiaries Crum & Forster and Hudson Insurance Group, facilitating a seamless transition for our customers.''
Toronto-based Fairfax is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.
The company and its subsidiaries have been on an acquisition spree during the past few years buying companies to expand its global business.
Last month, Fairfax agreed to purchase Ohio-based pet insurer Hartville Group, Inc.
In October 2012, RiverStone, a runoff subsidiary of Fairfax, acquired London-based Brit Insurance Ltd for about $300 million. In May, the company bought a 77-per cent stake in Thomas Cook Group Plc's Indian unit
Thomas Cook India Ltd for approximately $150 million.
In January 2012, Fairfax bought a 25-per cent stake in Thailand's reinsurer Thai Reinsurance Public Co Ltd.