NU Online News Service, Feb. 23, 3:44 p.m. EST

An investor advocacy group announced it is suing the board of Zenith National Insurance Corp. alleging Zenith's planned $1.4 billion sale to Fairfax Financial Holdings Ltd. undervalues the company.

The Shareholders Foundation Inc. in San Diego said it had filed a lawsuit against the board of the workers' compensation insurer in California State Court alleging its members had breached their fiduciary duties.

The action was brought on behalf of Zenith investors who purchased their shares before the merger was announced last Thursday by the Woodland Hills, Calif. insurer.

Under that agreement Toronto-based Fairfax Financial Holdings would acquire the 92 percent of the outstanding shares of Zenith it does not already own for $38 a share in cash.

The announcement that the Zenith board unanimously approved the merger said the offer represented a premium of 31.4 percent over the Feb. 17 closing price and a 34 percent premium over the 30-day average closing price for the period ending Feb. 17. The merger consideration of $38 per share also represents a premium of 34.5 percent over Zenith's book value as of Dec. 31, 2009.

But the Shareholders Foundation said Zenith shares had traded slightly over $38 per share after the announcement and at almost $29 per share the day before the news. It said shares had reached $32.24 per share in October 2009, $41.08 per share in September 2008, $43.93 per share in Jan. 2008, and over $50 per share in 2007.

According to the Foundation announcement, the lawsuit's complaint alleges that the transaction substantially undervalues Zenith shares and that Zenith National Insurance "is selling itself too cheaply, through an unfair process, to Fairfax Financial Holdings."

The Foundation said affected investors should contact it by e-mail at mail@shareholdersfoundation.com or call +1 (858) 779-1554.

Shareholders Foundation Inc. says it is not a law firm but helps investors by "matching shareholder problems with the right legal experts," The organization describes itself as an investor advocacy group which does research related to shareholder issues and informs investors of securities class actions, settlements, judgments and other legal related news to the stock/financial market.

The group said it offers help, support and assistance for shareholders and investors to find answers to questions and equitable solutions to problems.

Calls to the Foundation and Stanley Zax, Zenith's chairman and CEO, were not immediately returned.

In announcing the merger Mr. Zax said in a statement, "We believe the transaction will benefit our key constituents and enable our shareholders to realize compelling value for their investment in Zenith."

The Foundation suit is the latest in a series of actions that has been brought since the merger was announced.

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Shareholders&#039; Lawsuit Filed Over $1.4 Billion Zenith, Fairfax Merger

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