Fairfax To Acquire First Mercury For $294M

Toronto-based Fairfax Financial Holdings Limited has acquired specialty insurer First Mercury Financial Corp. in a transaction valued at approximately $294 million.

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

First Mercury's board of directors unanimously agreed to the deal and is recommending that stockholders vote in favor of the proposal.

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

Richard H. Smith, First Mercury's chairman, president and chief executive officer, said, "We look forward to expanding our specialty operations as part of the Fairfax group of companies. I am pleased to join the Fairfax organization and believe Fairfax's expertise and resources will enable us to achieve continued and even greater success."

Moody's Investors Service affirmed First Mercury's Baa2 insurance financial strength rating after the announcement and revised 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 strength rating under review with positive implications, also noting the benefits of First Mercury being owned by a larger group with more financial flexibility.