Fairfax Financial To Acquire ASI For $306 Million

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Fairfax Financial To Acquire ASI For $306 Million
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Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) agreed to acquire American Safety Insurance Holdings, Ltd. (NYSE:ASI) for $306 million, according to a 13D filing.

Fairfax Financial To Acquire ASI For $306 Million

American Safety Insurance Holdings, Ltd. (NYSE:ASI) indicated that on June 2, 2013, it has entered into an agreement and plan of merger with Fairfax and Fairfax Bermuda Holdings Ltd. Post-merger, American Safety Insurance Holdings, Ltd. (NYSE:ASI) would continue as the surviving corporation and an indirect wholly-owned subsidiary of Fairfax.

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Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH), a financial services holding company, intends to pay $29.25 per share in cash and expects to finance the merger with cash on hand.

The merger agreement provides that at the effective time, each outstanding share will be cancelled and converted into the right to receive $29.25 in cash, without interest as the merger consideration.

American Safety Insurance Holdings, Ltd. (NYSE:ASI) has indicated that subject to certain exceptions set forth in the merger agreement, it has agreed not to solicit, encourage or initiate any inquiries for any acquisition proposal nor participate in any discussion with any person any non-public information in connection with any acquisition proposal.

The specialty insurance and reinsurance underwriter, American Safety Insurance Holdings, Ltd. (NYSE:ASI), disclosed in the 13D filing that the proposed merger would be subject to approval from the company’s shareholders, besides insurance regulatory approvals and other customary closing conditions.

American Safety Insurance to Pay Fairfax a Termination Fee

American Safety Insurance Holdings, Ltd. (NYSE:ASI) has also disclosed that it would pay Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) a termination fee of $9,186,000 if conditions set out in the agreement are not complied with. Upon termination of the merger agreement under certain circumstances, American Safety Insurance would also reimburse Fairfax for its transaction expenses up to a maximum amount of $1.5 million.

The specialty insurance and reinsurance underwriter has also disclosed in the 13D filing that as part of the merger agreement, American Safety Insurance Holdings, Ltd. (NYSE:ASI)’s directors, certain of its executive officers, among others, have entered into voting agreements with Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) with respect to their respective shares. Such shares totaled 1,236,214 and constitute roughly 12.6 percent of the total issued and outstanding shares as of June 6, 2013.  The signing shareholders have agreed not to, on or after the date of the voting agreements, among other things, sell, assign, transfer or dispose of any voting shares, deposit any voting shares into a voting trust that is inconsistent with the voting agreement.

Canadian Warren Buffet

V. Prem Watsa is the Chairman and chief executive officer of Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH). He is considered the ‘Canadian Warren Buffet’. He is paying $306 million for American Safety Insurance Holdings, Ltd. (NYSE:ASI) which has a market cap of about $278 million.

Anh Hoang of The Motley Fool feels the acquisition of American Safety Insurance Holdings, Ltd. (NYSE:ASI) would help Fairfax Financials with more float for investments. Besides with potential synergy, American Safety Insurance Holdings, Ltd. (NYSE:ASI) could also lower its cost to generate floats.

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