Fairfax Financial To Buy Zenith National Insurance

February 19, 2010 (FinancialWire) — Canadian insurer Fairfax Financial Holdings Ltd. (TSX: FFH) and workers’ compensation specialist Zenith National Insurance Corp. (NYSE: ZNT) have entered into a merger agreement under which Fairfax will acquire all of the outstanding shares of Zenith common stock, which it does not currently own.

Under the deal, Zenith stockholders will receive $38.00 per share in cash, representing a premium of 31.4% to the closing price of Zenith common stock on February 17, 2010, the last trading day prior to the announcement, and a 34.0% premium to the 30-day average closing price for the period ending on February 17, 2010.

The merger consideration of $38 per share represents a premium of 34.5% to Zenith’s book value as of December 31, 2009. The transaction values Zenith at around $1.4 billion.

The transaction is scheduled to close in the second quarter of 2010. Following the closing, Zenith will continue to operate from its Woodland Hills, California headquarters and will become a wholly owned subsidiary of Fairfax.

Zenith’s board, after unanimously determining that the merger is in the best interest of Zenith and its stockholders, approved the merger agreement and resolved to recommend that Zenith’s stockholders vote to approve the merger.

Fairfax said that all of the directors and executive officers of Zenith, who in the aggregate beneficially own around 3.4 % of the outstanding shares of Zenith common stock, have agreed to vote their shares in favor of the merger.

Fairfax plans to finance the acquisition with a combination of holding company cash and subsidiary dividends, but said it will also raise $200 million through an equity issue prior to the closing. Following the completion of the acquisition, Fairfax expects to continue to maintain around $1 billion in cash and marketable securities at the holding company level.

Canada-based Fairfax is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.

Zenith National Insurance is a holding company engaged, through its wholly owned subsidiaries, Zenith Insurance and ZNAT Insurance, in the workers’ compensation insurance business, nationally.

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