Friday 23 June 2017

Watsa's Fairfax on the acquisition trail with Allied World

Fairfax Financial Holdings Ltd. Chairman and Chief Executive Officer Prem Watsa
Fairfax Financial Holdings Ltd. Chairman and Chief Executive Officer Prem Watsa

Scott Deveau

Bank of Ireland shareholder Fairfax Financial Holdings agreed to buy insurer Allied World Assurance for $4.9bn (€4.69bn) in cash and stock in ceo Prem Watsa's largest purchase.

Fairfax will pay $54 per share, which is 18pc higher than Allied World's closing price on Friday. For every share, Allied investors will receive about $10 in cash - half from Fairfax and the rest from a pre-closing dividend by Allied - as well as $44 of Fairfax's stock, according to a statement from the companies. Toronto-based Fairfax has an option to increase the cash portion by up to $30 per share. Smaller carriers have sought merger partners in recent years as commercial insurance buyers and their brokers prefer companies with scale. The deal that Allied reached will make it a wholly owned subsidiary, while keeping its executive and senior management teams. Allied is based in Zug in Switzerland.

"Allied World will operate within the Fairfax group on a decentralised basis after closing, and we are looking forward to supporting Scott and the entire team at Allied World in growing their business over the long-term," Watsa said in the statement, referring to Allied ceo Scott Carmilani.

Fairfax is among major North American insurers that have been expanding in the specialty market through takeovers to diversify. Earlier this month, Boston-based Liberty Mutual agreed to buy Ironshore for about $3bn (€2.87bn) to expand in the Bermuda market. Watsa, often compared to Warren Buffett, bought into Bank of Ireland in 2011 at 10 cent a share. This month he sold €415m of the stock at 0.23 cent a share, having already reduce the stake from an original 9pc to 2.9pc. He retains around 1.5pc of Bank of Ireland shares. (Bloomberg)

Irish Independent

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