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‘All regulatory approvals’ received for Fairfax-Allied World merger but deal still not complete


June 29, 2017   by Canadian Underwriter


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Toronto’s Fairfax Financial Holdings Ltd. announced Thursday it now has “all regulatory approvals that are necessary” for it to merge with Swiss insurer and reinsurer Allied World Assurance Company Holdings AG but suggested fewer than 90% of Allied World shareholders have tendered their shares.

On Dec. 18, Allied World and Fairfax announced that both firms’ board of directors agreed to a merger. Under that agreement, shareholders of Allied World – which is traded on the New York Stock Exchange – would receive a combination of Fairfax shares and cash equal in value to US$54 per Allied World share. With a total value of nearly US$5 billion, the Allied World deal was Fairfax’s largest proposed acquisition to date, as of December, 2016, A.M. Best Company Inc. suggested earlier.

In addition to Northbridge Insurance, Fairfax also owns OdysseyRe, Lloyd’s insurer Brit PLC and Morristown, N.J.-based commercial specialty insurer Crum & Forster, among others.

Allied World shareholders “who have not yet accepted the offer” to tender their shares “are urged to do so as soon as possible,” Allied World and Fairfax  said in a press release June 26, 2017. The offer and withdrawal rights “will expire” by 11:59 p.m. Eastern time June 30, “unless the offer is extended,” they said on Monday.

If the deal is closed, Fairfax will not own all of Allied World. Third-party partners, including Ontario Municipal Employees Retirement System (OMERS), are contributing to the cash component of the offer. OMERS said earlier it will contributed $1 billion and get a 21% stake in Allied World.

Related: Fairfax-Allied merger offer expires Friday night

If the merger goes through, Fairfax “should benefit from further diversification of its business” A.M. Best suggested in an earlier release.

Allied World is based in Zug, Switzerland, has several offices in the United States and also writes commercial coverage in Canada through a Toronto branch office. Its offerings in Canada include privacy breach, directors and officers, representations and warranty and energy risks, among others.

“In keeping with its practice of maintaining operating autonomy at its subsidiaries, Fairfax does not intend to integrate Allied World’s operations, other than investment management,” A.M. Best said in a release in December, 2016, shortly after Fairfax and Allied World went public with their deal.

In primary insurance, “we really see a rather different profile of business from Allied World than what we currently have in our Fairfax companies,” Andy Barnard, president and chief operating officer of the Fairfax Insurance Group, said Dec. 19, 2016 during the conference call.

Fairfax also has ownership stakes in several non-insurance firms in Canada, including Sporting Life, William Ashley China, The Keg steak house chain and Cara Operations, whose restaurant brands include Harvey’s Swiss Chalet, Milestone’s and Montana’s, among others.