Recently, the shareholders of Bermuda based insurer, American Safety Insurance Holdings Ltd. (ASI) approved its merger with Toronto based financial services holding company, Fairfax Financial Holdings Limited.
The deal was previously announced on Jun 2, 2013 whereby it was stated that Fairfax will acquire all the outstanding shares of American Safety for a purchase consideration of $29.25 per share or $306 million in aggregate. On Aug 7, 2013, Fairfax increased the purchase consideration by 3.4% to $30.25 per share. The deal was expected to culminate in the fourth quarter of 2013 and was pending regulatory approval as well as approval from American Safety’s shareholders. After receiving the nod from the shareholders of American Safety, the agreement only awaits regulatory approval, following which we expect the acquisition to close ahead of the scheduled date.
Previously, executives who had a 10% stake in American Safety, supported the decision and agreed to vote for the merger. At present, nearly 84.48% of the shareholders voted at the company’s Special General Meeting out of which nearly 99.4% voted in favor of the deal.
As previously stated, Fairfax will utilize internal resources to fund the transaction and will not need holding company cash for the purpose. On closing, many of the specialty lines of American Safety are expected to be added to two subsidiaries of Fairfax. These include Crum & Forster and Hudson Insurance Group. The acquisition will render Fairfax in receipt of $480 million of additional investable assets. American Safety being one of the leading names in certain specialty lines of business, the deal is expected to enhance the insurance operations of Fairfax.
On Jun 3, 2013, in connection with the above deal, Fairfax inked a purchase and sale agreement with Tower Group International Ltd. (TWGP). After the close of the deal, American Safety Reinsurance Ltd. (ASRe), a subsidiary of American Safety is to be acquired by Tower Group from Fairfax for $59 million. This deal is expected to culminate in the second half of 2013 and is subject to regulatory approval. As per the deal, the operations and employees of ASRe will join the Bermuda reinsurer of Tower – Tower Reinsurance Ltd. (Tower Re).
American Safety currently carries a Zacks Rank #5 (Strong Sell). Among other insurers, EMC Insurance Group Inc. (EMCI) and Everest Re Group Limited (RE) carry a favorable Zacks Rank #1 (Strong Buy).
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