NU Online News Service, Nov. 1, 3:30 p.m. EDT

Toronto-based Fairfax Financial Holdings Limited has acquiredspecialty insurer First Mercury Financial Corp. in a transactionvalued at approximately $294 million.

Under the deal, stockholders of Southfield, Mich-based FirstMercury will receive $16.50 per share, which the companies saidrepresents a premium of 45.2 percent to the closing price of FirstMercury common stock on Oct. 28, when the deal was announced.

First Mercury's board of directors unanimously agreed to thedeal and is recommending that stockholders vote in favor of theproposal.

Prem Watsa, chairman and chief executive officer of Fairfax,said, "The acquisition of First Mercury provides Fairfax with awell-established surplus lines and specialty platform with a strongtrack record."

Richard H. Smith, First Mercury's chairman, president and chiefexecutive officer, said, "We look forward to expanding ourspecialty operations as part of the Fairfax group of companies. Iam pleased to join the Fairfax organization and believe Fairfax'sexpertise and resources will enable us to achieve continued andeven greater success."

Moody's Investors Service affirmed First Mercury's Baa2insurance financial strength rating after the announcement andrevised the outlook to positive from negative.

The outlook change reflects the "anticipated benefits from[First Mercury] being part of a larger, more diversified group,"Moody's said.

A.M. Best placed First Mercury's A-minus financial strengthrating under review with positive implications, also noting thebenefits of First Mercury being owned by a larger group with morefinancial flexibility.