Fairfax to acquire Zenith National Insurance for $1.4 billion

Prem Watsa CEO, Fairfax Financial Holdings Limited

Canada's Fairfax Financial Holdings Limited, run by Hyderabad-born Prem Watsa yesterday agreed to acquire all the outstanding shares that it does not already own in Zenith National Insurance Corporation for about $1.3 billion in cash.

Toronto-based Fairfax will acquire the 91.6 per cent that it does not already own in the Woodland Hills, California-based Zenith at $38 a share in cash, which values the insurer at approximately $1.4 billion.

Fairfax said that the merger consideration of $38.00 per share, represents a premium of 34.5 per cent to Zenith's book value as of 31 December 2009.

The board of Zenith has approved the merger and will recommend that shareholders accept it. All of the directors and executive officers of Zenith, have agreed to vote in favour of the merger.

Zenith will become a subsidiary of Fairfax, but will continue to operate out of its California headquarters.

Fairfax had acquired a 38.4 per cent stake in Zenith in 1999 for $184.1 million. It then sold the entire stake between 2004 and 2006 and booked a profit. Again in January 2010, Fairfax disclosed it had built an 8.4 per cent stake in Zenith.