Brit Plc rises after Fairfax Financial’s $1.88 bn acquisition offer

Brit Plc surged following Fairfax Financial Holdings Ltd agreeing to the acquisition of the Lloyd's of London insurer for $1.88 billion in the latest round of industry consolidation.

The stock surged 10.2 per cent to 302.1 pence in the morning in London, the biggest intraday gain after the initial public offer of the firm in March. Fairfax, the insurer led by Prem Watsa, would pay 280 pence in cash for each share of Brit, according to the Toronto-based buyer's statement. The deal would include a 2014 dividend offer of 305 pence a share.

Bloomberg quoted Eamonn Flanagan, an analyst at Shore Capital in Liverpool, England who rates Brit shares as saying another one bit the dust with the recommended cash bid by Fairfax for Brit.

XL Group Plc agreed to buy Catlin Group Ltd in January for about £2.8 billion to strengthen its position as competition mounted from hedge funds and other investors to underwrite insurance. Axis Capital Holdings Ltd, in the same month announced a plan for merging with PartnerRe Ltd in the US even as RenaissanceRe Holdings Ltd entered into a deal in November to purchase Platinum Underwriters Holdings Ltd.

Meanwhile, Reuters reported that the offer price of 305 pence per share represented premium of 11.2 per cent to Brit's closing price on 16 February.

According to Fairfax, it had received hard irrevocable undertakings to accept the offer from entities managed by Apollo Global and CVC Capital Partners, which, between them hold around 73 per cent of Brit's issued share capital.

Apollo and CVC, which acquired Netherlands-based Brit in 2010, sold about 25 per cent of the company, launching it on the London stock exchange last year and valuing it up to 960 million pounds ($1.48 billion).

Brit's operations extend across a broad class of commercial specialty insurance with a strong focus on property, casualty and energy business.

"Brit has an outstanding track record over the last ten years and will continue to operate on a decentralised basis once owned by Fairfax," said Fairfax chief executive Prem Watsa.

According to the company's statement, the acquisition was accretive to Fairfax on several metrics, including gross revenue per share and investments per share.