Canadian Underwriter
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Fairfax expands U.S. business through acquisition


February 18, 2010   by Canadian Underwriter


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Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) has acquired Zenith National Insurance Corp (NYSE: ZNT) for approximately $1.4 billion, a premium of 34.5% to Zenith’s book value as at Dec. 31, 2009.
Zenith is a California-based commercial insurer that specializes in workers compensation. Under the merger agreement, Zenith will continue to operate from its Woodland Hills, California headquarters and will become a wholly owned subsidiary of Fairfax.
The deal is expected to close in 2010 Q2.
There are no financing conditions involved in the transaction, a Fairfax release says. Fairfax intends to finance the acquisition with a combination of holding company cash and subsidiary dividends, but will also raise $200 million through an equity issue prior to the closing, a Fairfax release says.
Following the completion of the acquisition, Fairfax expects to continue to maintain approximately $1 billion in cash and marketable securities at the holding company level.
“Zenith has an outstanding long-term underwriting track record spanning over 30 years under Stanley [Zax]’s leadership,” said Prem Watsa, Fairfax’s CEO and chairman.
“Following the successful completion of the transaction, there will be no changes in Zenith’s strategic or operating philosophy. Zenith will continue to operate its business as it has always been run under Stanley’s excellent leadership, with investment management centralized at Fairfax.”


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