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Allied World to be Acquired by Fairfax in $4.9 Billion Deal
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Allied World Assurance Company Holdings, AG (AWH - Free Report) will be acquired by Fairfax Financial Holdings Limited (FRFHF - Free Report) for $4.9 billion in a cash-stock deal. The transaction, which is pending approvals, is expected culminate in the first half of the second quarter of 2017. The combination will create a global leader in property and casualty insurance, reinsurance and investments.
Transaction Details
The purchase consideration of $4.9 billion or $54.00 per share consists of $10.00 in cash and $44.00 in Fairfax shares. The transaction price represents about 18% premium to Allied World's closing stock price of $45.77 as of Dec 19, 2016. Of the cash consideration, $5.00 per share will be paid in the form of a pre-closing cash dividend by Allied World.
However, Fairfax has the option to increase the cash consideration by up to $30.00 per Allied World share, for a total of $40.00 cash per Allied World share.
Of the stock consideration, a portion worth $14 per share is payable at a fixed exchange ratio of 0.030392. The remainder of the stock consideration – $30 per share – will be determined based on the volume weighted average closing price of Fairfax Shares for the 20 trading days ending on the day prior to closing, ranging between $435.65 and $485.65 per share. If the volume weighted average price of Fairfax shares is below $435.65 per share, the stock portion of the consideration will be fixed at 0.068862 Fairfax shares for each share of Allied World. If the volume weighted average price of Fairfax shares is above $485.65, the stock portion of the consideration will be fixed at 0.061772 Fairfax Shares for each share of Allied World.
Acquisition Rationale
Allied World boasts a market-leading global property, casualty and specialty insurer and reinsurer with increasing global reach. The acquisition will thus complement the Toronto-based insurance group’s world-wide presence and diversify its group risk portfolio. On the other hand, Allied World will stand to benefit from Fairfax's expertise in Canada, the U.S. and international insurance and reinsurance markets. This in turn will boost the Zacks Rank #4 (Sell) insurer’s global product and service offering. You can see the complete list of today’s Zacks #1 Rank stocks here.
Prem Watsa, Chairman and CEO of Fairfax, stated that Allied World will operate within the Fairfax group on a decentralized basis, post closure.
Shares of Allied World gained more than 23% year to date, outperforming the Zacks categorized Property, Casualty and Title Insurance industry’s increase of 21.7%. However, shares of Fairfax lost 2.2% over the same time frame. Nonetheless we expect, the combination will result in a compelling operational performance and will drive shares higher.
Inorganic Growth Story
Fairfax Financial has remains focused on strategic acquisitions to enhance its operational profile, boost capabilities and expand global reach. This October, the company agreed to buy insurance operations from American International Group Inc. (AIG - Free Report) in Argentina, Chile, Colombia, Uruguay, Venezuela and Turkey. In July, the company announced its intention to acquire Zurich Insurance Company Ltd.’s South African and Botswana operations.
Acquisitions by Other Insurers
Acquisitions seem a well-accepted strategy to ramp up growth profile. Recently, Arthur J. Gallagher & Co. (AJG - Free Report) acquired National Ethics Bureau, Inc. to enhance and extend its U.S. affinity operations.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
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Allied World to be Acquired by Fairfax in $4.9 Billion Deal
Allied World Assurance Company Holdings, AG (AWH - Free Report) will be acquired by Fairfax Financial Holdings Limited (FRFHF - Free Report) for $4.9 billion in a cash-stock deal. The transaction, which is pending approvals, is expected culminate in the first half of the second quarter of 2017. The combination will create a global leader in property and casualty insurance, reinsurance and investments.
Transaction Details
The purchase consideration of $4.9 billion or $54.00 per share consists of $10.00 in cash and $44.00 in Fairfax shares. The transaction price represents about 18% premium to Allied World's closing stock price of $45.77 as of Dec 19, 2016. Of the cash consideration, $5.00 per share will be paid in the form of a pre-closing cash dividend by Allied World.
However, Fairfax has the option to increase the cash consideration by up to $30.00 per Allied World share, for a total of $40.00 cash per Allied World share.
Of the stock consideration, a portion worth $14 per share is payable at a fixed exchange ratio of 0.030392. The remainder of the stock consideration – $30 per share – will be determined based on the volume weighted average closing price of Fairfax Shares for the 20 trading days ending on the day prior to closing, ranging between $435.65 and $485.65 per share. If the volume weighted average price of Fairfax shares is below $435.65 per share, the stock portion of the consideration will be fixed at 0.068862 Fairfax shares for each share of Allied World. If the volume weighted average price of Fairfax shares is above $485.65, the stock portion of the consideration will be fixed at 0.061772 Fairfax Shares for each share of Allied World.
Acquisition Rationale
Allied World boasts a market-leading global property, casualty and specialty insurer and reinsurer with increasing global reach. The acquisition will thus complement the Toronto-based insurance group’s world-wide presence and diversify its group risk portfolio. On the other hand, Allied World will stand to benefit from Fairfax's expertise in Canada, the U.S. and international insurance and reinsurance markets. This in turn will boost the Zacks Rank #4 (Sell) insurer’s global product and service offering. You can see the complete list of today’s Zacks #1 Rank stocks here.
Prem Watsa, Chairman and CEO of Fairfax, stated that Allied World will operate within the Fairfax group on a decentralized basis, post closure.
Shares of Allied World gained more than 23% year to date, outperforming the Zacks categorized Property, Casualty and Title Insurance industry’s increase of 21.7%. However, shares of Fairfax lost 2.2% over the same time frame. Nonetheless we expect, the combination will result in a compelling operational performance and will drive shares higher.
Inorganic Growth Story
Fairfax Financial has remains focused on strategic acquisitions to enhance its operational profile, boost capabilities and expand global reach. This October, the company agreed to buy insurance operations from American International Group Inc. (AIG - Free Report) in Argentina, Chile, Colombia, Uruguay, Venezuela and Turkey. In July, the company announced its intention to acquire Zurich Insurance Company Ltd.’s South African and Botswana operations.
Acquisitions by Other Insurers
Acquisitions seem a well-accepted strategy to ramp up growth profile. Recently, Arthur J. Gallagher & Co. (AJG - Free Report) acquired National Ethics Bureau, Inc. to enhance and extend its U.S. affinity operations.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>