Canadian insurer Fairfax Financial Holdings announced on Monday February 16th that it was acquiring UK-based Brit PLC. Brit is an industry leading Lloyd’s of London specialty insurer and reinsurer. Fairfax is offering 305 pence per Brit share, which works out to around $1.9 billion total value for the firm.
More on Fairfax Financial – Brit deal
Fairfax notes in its statement that it has received commitments to vote for the deal from funds Apollo and CVC who control around 294 million Brit Shares representing approximately 73% of Brit’s issued share capital.
The offer price for Brit represents a premium of 11.2% to the closing price of 274.2 pence per Brit Share on the day prior to this announcement. This makes the total value of the deal around US$1.88 billion.
Just last week, Fairfax announced 2014 earnings of nearly US$1.6 billion. When you subtract the final 25 pence per share dividend expected to be declared by the board of directors of Brit for the year ended December 31, 2014, Fairfax’s purchase price of 280 pence per Brit Share is just under ten times the firm’s earnings based on annualized net earnings for the six months ending June 30, 2014.
The statement says that the acquisition is accretive to Fairfax in terms of gross revenue per share and investments per share. Fairfax has been working closely with the Brit team to develop an understanding of their business and operations since buying Brit’s runoff business back in the summer of 2012.
Statement from Fairfax CEO Prem Watsa
“We welcome Mark Cloutier and his market leading specialty insurance and reinsurance team at Brit to our expanding global specialty platform,” said Prem Watsa, Chairman and CEO of Fairfax. “Brit has an outstanding track record over the last ten years and will continue to operate on a decentralized basis once owned by Fairfax. With the acquisition of Brit, Fairfax will have a significant top five position at Lloyds of London. We look forward to working with Mark and the entire Brit team to further develop their business over the longer-term.”