Prem Watsa's Fairfax Financial to buy Swiss insurer Allied World Assurance for $4.9 bn
19 December 2016
Canada's Fairfax Financial Holdings Ltd, a property and casualty insurer run by billionaire Prem Watsa, yesterday struck a deal to buy Swiss insurer Allied World Assurance Company Holdings AG for $4.9 billion in cash and stock.
Fairfax, based in Ontario, is offering to pay $10.00 in cash and $44.00 in Fairfax shares, an 18 per cent premium to Allied World's Friday closing price of $45.77.
The transaction, which is expected to close in the second quarter of 2017, is subject to Fairfax receiving a sufficient number of Allied World Shares, approval by Allied World shareholders and, to approvals from regulators.
Post closing, Allied World will hold around 27-per cent stake in the combined company -- or about 10 per cent if Fairfax exercises the option to use more cash instead of stock.
The combined firm will oversee an asset portfolio of $39 billion.
Baar, Switzerland-based Allied World was formed in 2001 after the 11 September terror attacks through the merger of AIG and Chubb Corp.
The company's insurance products include general property / casualty coverage as well as specialty products such as environmental, health care, and professional liability coverage targeted to small and mid-market clients.
Its Bermuda-based international insurance operations serve larger companies based in North America, while its European and Asian offices serve non-US based companies.
Its Allied World Reinsurance business provides a mix of reinsurance coverage to US insurance companies.
Allied World's international reach is highly complementary to Fairfax's existing worldwide operations and the acquisition will further diversify Fairfax's group risk portfolio.
In addition, Allied World will be able to leverage Fairfax's expertise in Canada, the US and international insurance and reinsurance markets.
"We are excited to have Allied World join the Fairfax group," said Prem Watsa, chairman and CEO of Fairfax. "Allied World is a high-quality company with an excellent long-term track record and an outstanding management team led by Scott Carmilani. Allied World will operate within the Fairfax group on a decentralized basis after closing."
"This is a tremendous opportunity for Allied World," said Scott Carmilani, president, CEO and chairman of Allied World. "Fairfax provides a great home for Allied World to continue to build a strong business for our customers, business partners and employees."
Fairfax is a financial services holding company with interests in property and casualty insurance and investment management, and employs over 8,200 globally.
It operates through 12 subsidiaries or joint ventures in Canada, the US, Singapore, Hong Kong and India.
Fairfax is led by Hyderabad-born Prem Watsa, who earned a chemical engineering degree from the Indian Institute of Technology Madras in 1971-1972.
He later changed his field entirely after moving to Canada in late 1972 and got a masters degree in business administration from the University of Western Ontario.
Watsa, who controls nearly half of Fairfax, has often been called the Warren Buffet of Canada for his skill in value-oriented investing strategies.
Fairfax set up Fairfax India in late 2014 to boost the firm's investment in India and raised more than $1 billion via its initial public offering in January 2015.