Fairfax bets on growth in Trump’s America
Prem Watsa is significantly expanding the reach of insurer Fairfax Financial Holdings Ltd. in the United States with his largest deal — a US$4.9 billion cash and stock acquisition of Allied World Assurance Co.
Watsa said Monday he views the purchase as a bet on economic growth under U.S. president-elect Donald Trump and Republican majorities in Congress.
The new regime “has the strong potential to make the business climate for growth in the United States great again, relative to the rest of the world,” Watsa said on a conference call. “Our businesses in the U.S., including Allied World, will benefit from any such positive economic development.”
Switzerland-based Allied World, which was founded 15 years ago, focuses on specialty insurance and reinsurance. It insures middle market and Fortune 1,000 companies in North America through 13 regional offices.
Once the acquisition by Fairfax is completed, the combined companies will have an asset portfolio of US$39 billion.
Watsa, Fairfax’s chief executive who is nevertheless known for some successful plays in down markets, called Allied World “a high-quality company with an excellent longterm track record and an outstanding management team.” He said the plan is for the company to operate within the Fairfax group, but on a “decentralized basis.”
The US$54 a share value of the deal consists of US$10 in cash, including a US$5 special dividend from Allied World to its shareholders, and US$44 in Fairfax stock. Toronto-based Fairfax has the option to boost the cash portion by up to US$30 a share.
The offer represents an 18 per cent premium to the closing price of Allied World on the last trading day before the deal was announced. It is expected to close in the first quarter of 2017.