Fairfax Financial Holdings Ltd. chairman and chief executive officer Prem Watsa speaks during the company's annual meeting in Toronto April 11, 2013.© Aaron Harris / Reuters/Reuters
Fairfax Financial Holdings Corp. has struck its largest-ever deal to buy Swiss insurance company Allied World Assurance Company Holdings AG, expanding its footprint in the U.S. and around the world.
Toronto-based Fairfax will buy the property and casualty insurer in a transaction valued at $4.9-billion (U.S.). Allied World will operate as a separate name brand, much like the other insurance companies in Fairfax's stable.
Allied World was only founded in 2001, but has since grown into a sizable international property, casualty and specialty insurance and reinsurance company. The Zug, Switzerland-based business focuses on insuring commercial risks for sectors such as marine, construction and property, as well as many other niche areas.
Allied World has 13 offices in North America, most of them in the U.S., which will broaden Fairfax's exposure south of the border. At the same time, Fairfax adds new footholds in Europe and Asia Pacific and Latin America to its international base of offices.
The deal will see Allied World's $9.4-billion investment portfolio added to Fairfax's assets under management, which would give the company a combined portfolio of $39-billion in assets.
Prem Watsa, founder and chief executive officer of Fairfax, praised Allied World for being "a high-quality company with an excellent long-term track record and an outstanding management team."
Fairfax is best known in Canada for its investments in consumer-facing companies such as Blackberry Ltd. and Cara Operations Ltd., which owns the Swiss Chalet, Kelsey's and Milestones chain restaurants. But Fairfax is active across the world as a holding company for several insurance and reinsurance companies, including London-based specialty insurer Brit PLC, which it acquired in a deal valued at about $2.3-billion nearly one year ago. Other notable Fairfax insurance companies include Crum & Forster and Northbridge.
Allied World has also been focused on expanding internationally, recently acquiring Asian operations.
"Our shareholders will benefit from Fairfax's tremendous investment capabilities as demonstrated by its superior long-term investment track record," Scott Carmilani, chief executive officer of Allied World, said in a statement.
Fairfax and Allied World will be combined in a transaction worth $54 a share of Allied World, an offer made up of $10 in cash and $44 in Fairfax shares.
The deal is expected to close in the first quarter of 2017, pending shareholder and other customary approvals. Fairfax's offer has the support of Allied World's board and Fairfax expects that its target's management team will stay on in their current roles.