Canadian Underwriter

Fairfax Acquires Zenith National Insurance

April 9, 2010   by Terri Goveia

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Fairfax Financial Holdings $1.3 billion (US) bid for California-based Zenith National Insurance Corp. will be partially funded with a $200 million (U.S.) equity issue.

Under a merger agreement, Fairfax will pay $38 (US) per share for the 92% of Zenith it doesn’t already own. The company announced the acquisition and the equity issue—which will offer subordinate voting shares to institutional investors at $355 per share– February 18.

“Fairfax intends to finance the acquisition with a combination of holding company cash and subsidiary dividends, and will use the proceeds of this offering to increase its cash position at the holding company,” according to a company statement.

Zenith’s board of directors have approved the deal, though it is still subject to Zenith shareholder and regulatory approval.

The ratings for both companies will remain “stable and unchanged” following the announcement, according to A.M. Best analysts. Once the deal is complete, Fairfax’s debt to total capital ratio will stay within the guidelines for its ratings, they note in a bulletin following the announcement, adding, “Fairfax has integrated previous acquisitions into its structure in a similar manner.”

This story was originally published by Canadian Insurance Top Broker.