Shares in insurer Brit soared more than 10 per cent this morning, after Canadian financial services firm Fairfax revealed plans to buy the insurer for £1.22bn less than a year after it went public.
Last night it emerged private equity owners CVC and Apollo were looking to offload the business, which specialises in underwriting complex products such as kidnapping insurance, and had attracted interest from “several parties”.
CVC and Apollo sold about 25 per cent of Brit last year through an IPO that valued it at around £960m.
This morning it emerged that Fairfax Financial Holdings, via its wholly-owned subsidiary FGL, was offering 305p per share, of which 280p will be in cash and the remaining 25p as a final dividend.
That is a premium of 11.2 per cent on yesterday's closing price of 274.2p per share, and 27.1 per cent on the offer price of 240p when Brit listed on 28 March.
Faifax said in a statement this morning: “The Brit directors, who have been so advised by J.P. Morgan Cazenove, consider the terms of the offer to be fair and reasonable."
The directors - Richard Ward, Mark Cloutier and Hans-Peter Gerhardt - intend unanimously to recommend that Brit shareholders accept the offer.
Fairfax has also received “hard irrevocable undertakings” that Apollo and CVC will accept the offer “as soon as is reasonably practicable and in any event, within five business days following the posting of the offer document”.
Chairman Richard Ward said:
Brit's Board is pleased to recommend the combination with Fairfax, which I believe will bring us significantly closer to realising our strategy of building the leading global speciality (re)insurer. Our two businesses are highly complementary and the proposed deal provides both groups with an exciting opportunity to deliver our respective growth ambitions... The offer represents a strong result for all our shareholders and produces attractive financial returns following our successful IPO.
I am proud of the success we have achieved over the past year as a public company.
Prem Watsa, Fairfax chairman and chief executive, added:
With the acquisition of Brit, Fairfax will have a significant top five position at Lloyd's of London. We look forward to working with [chief executive] Mark [Cloutier] and the entire Brit team to further develop their business over the longer-term.