Allied World To Be Bought By Fairfax Financial For $4.9 Bln In Cash, Stock

(RTTNews) - Allied World Assurance Co. Holdings, AG (AWH), a property, casualty and specialty insurer and reinsurer said it agreed to be acquired by Canada's Fairfax Financial Holdings Limited (FFH_U.TO, FFH.TO, FRFHF) in a $4.9 billion cash and stock deal. The combination is expected to create a major in property and casualty insurance, reinsurance and investments.

Allied World shareholders would receive a combination of Fairfax subordinate voting shares and cash equal to $54 per Allied World Share.

Each Allied World shareholder will receive cash consideration of $10 per share, of which $5 will be paid in the form of a pre-closing cash dividend by Allied World. A portion of the stock consideration, with a value of $14 based on the closing price of Fairfax Shares as of December 16, is payable at a fixed exchange ratio of 0.030392. The remaining portion of the stock consideration to Allied World will be a number of Fairfax Shares with a value equal to $30.

Fairfax has the option to increase the total cash payable to Allied World shareholders by up to $30 per Allied World share, for a total of $40 cash per Allied World share.

The companies noted that Fairfax may elect to fund the $30 in cash by an equity or debt issuance or by bringing in third party partners.

The per share offer price represents a premium of 18% to the closing price of $45.77 per Allied World Share on December 16, being the last business day prior to the announcement.

The transaction has been unanimously approved by the boards of directors of both companies. The deal would be effected by way of an exchange offer.

Closing of the transaction is currently expected to occur in the second quarter of 2017. Following this, Allied World will operate within the Fairfax group on a decentralized basis.

Scott Carmilani, President, CEO and Chairman of Allied World, said, "The success of Fairfax's decentralized approach in empowering their management teams to drive profitable underwriting and combining Fairfax's investment philosophy will position us to create long-term value for shareholders."

Allied World shares gained 0.59 percent on Friday and settled at $45.77 on the NYSE.

In Canada, Fairfax Financial shares settled at C$614.45 on Friday, up 1.56 percent.