Fairfax to acquire remaining shares of Northbridge Financial Corp.

Fairfax Financial Holdings Limited (TSX and NYSE:FFH) and Northbridge Financial Corporation (TSX: NB) have announced that Fairfax intends to make a formal offer to acquire all of the outstanding common shares of Northbridge — other than those shares already held by Fairfax — for Cdn$39 in cash per common share, representing total cash consideration of approximately Cdn$686 million.
The price of $39 per Northbridge common share represents a premium of approximately 28.9% over the $30.25 closing price of Northbridge common shares on the Toronto Stock Exchange on Nov. 13, 2008, Fairfax notes in a press release.
Fairfax currently owns 30.1 million common shares, or approximately 63.1%, of Northbridge’s outstanding common shares.
The deal would take Northbridge Financial Corp. private. “Following the completion of the proposed transaction, it is expected that Northbridge would become a wholly-owned subsidiary of Fairfax,” Fairfax notes in a press release.
In announcing the offer, Fairfax chairman and CEO Prem Watsa said: “The Fairfax proposal represents an excellent opportunity for Northbridge shareholders to realize a significant premium as well as immediate liquidity for their shares.
“[Northbridge president and CEO] Mark Ram has done an exceptional job and we’re very pleased with the leadership he has brought to Northbridge, Canada’s largest commercial insurance group.
“As with our decentralized U.S. insurance operation, Crum & Forster, we intend for Northbridge to continue operating on a standalone basis, with Mark and his team in charge of all aspects of our Canadian insurance operations.”
Commenting on the offer, BMO Financial analyst John Reucassel said in a research note that “while we believe this is a reasonable offer, business conditions should improve for Northbridge in 2009.
“This view is based on the outlook for higher premiums in the industry based on poor investment experience over the last year.”