Zenith National Insurance Corp. (NYSE: ZNT) has struck a deal to be acquired by Fairfax Financial Holdings Limited (TSX: FFH and FFH.U). The deal was announced this morning. The deal values Zenith at $38 per share – a premium of 31.4% over its close yesterday and an overall value of approximately $1.4 billion -- will make Zenith a wholly owned subsidiary of the Toronto-based financial services company.
In an exclusive interview early this morning with Workers' Comp Executive, Zenith president Stanley Zax said that neither Zenith's strategy nor its people will change as a result of the deal. It’s commitment to the market and its brokers and customers remains in place.
The deal is subject to regulatory approval and is expected to close in the second quarter. The company’s board of directors has already approved the sale and its executives and directors will be voting their 3.4% of outstanding shares in favor of the merger. Fairfax currently owns 8.4% of the California carrier.
Zax explains the market is showing a high confidence that the deal will close as evidenced by trading two hours into the day. While the stock normally trades a daily average of 250,000 shares, as of 7:25 AM California time trading was over 13 million shares and the price was up to $37.77 as arbitragers do what they do.
Zax was clearly delighted with the deal and was quite complementary about his team. It’s a privilege to have the kind of people we do, Zax said, running down his list of quality players. We have professional, self motivated people who are interested in doing the right thing, he added.
One of those people, Janet Frank, formerly of State Fund and CNA, will be joining the company in the next few weeks as president and chief operating officer of Zenith Insurance and executive vice president of Zenith National. Frank told Workers’ Comp Executive this morning she was equally excited about the deal.
After the deal closes Zenith will continue operating from its Woodland Hills location. What will change is that Fairfax will manage the investment portfolio from its centralized operations.
In addition to being an existing shareholder, Fairfax has also been a competitor of Zeniths' in the California workers' comp scene through its ownership of Crum & Forester, a Morristown, N.J.-based property and casualty insurer. Crum & Forester companies include United States Fire Insurance Company, North River Insurance Company and TIG Insurance Company, which collectively wrote $75 million in premium in 2008. That gave Fairfax nearly 1% of the market and made it the 24th largest group operating in the state. It also owns Oddesy Re.
This kind of coverage doesn’t come from our news release regurgitating competitors.
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Filed by Dale Debber in Sacramento and Brad Cain in San Francisco