Fairfax Financial to buy Allied World for $4.9 billion

(Reuters) — Toronto-based insurance group Fairfax Financial Holdings Ltd. has agreed to buy Allied World Assurance Company Holdings A.G. for $4.9 billion in cash and stock, the companies said on Sunday.

Fairfax will pay owners of Zug, Switzerland-based Allied World $54 per share — $10 in cash and $44 in Fairfax stock. The offer amounts to an 18% premium above Allied World’s Friday closing price of $45.77, their statement said.

The merger would create a leader in property/casualty insurance, reinsurance and investments, the release said. Boards of directors of both companies approved the deal.

Allied World would operate “on a decentralized basis” within the Fairfax group, Prem Watsa, chief executive of Fairfax, said in the statement.

Fairfax said it expected to close the deal in the second quarter of 2017.