Yesterday I said
“Kudos to Worker Comp Exec, they were the first” to get the notice out about Fairfax’ purchase of work comp insurer Zenith for $1.4 billion.
I should have said Work Comp Exec was the first to send the notice to
me, as WorkCompCentral posted their news a bit earlier on their site.
Yesterday’s post appears below; first the analysis.
Good move by Fairfax. Zenith is one of those rare WC insurers; it doesn’t follow the suicidal market cycles, buying business in the soft market and running for the hills when the market hardens. CEO Stanley Zax has built a solid management team and the addition of Janet Frank (sources say she was aware of the deal and will assume the presidency of Zenith) adds additional strength.
So why now?
My take is Fairfax recognizized the market is about to turn, and decided to buy now before the stock price went up. They don’t want companies in turnaround mode as Fairfax ‘buys and leaves alone’. And if the market turns by the end of this year (as I’ve been predicting) they wouldn’t have time to fix a broken insurer. Fairfax wanted to expand their footprint with an insurer well-positioned to benefit from a hardening market, and Zenith fits that need quite well.
This represents a premium of about 30% over the current stock price, welcome news for any and all Zenith shareholders. The market appears to believe the deal, scheduled to close in the second quarter, will get done as Zenith is currently trading just shy of the stated purchase price.
Zenith will reportedly continue to operate independently; this isn’t a surprise nor is it one of those “yeah, sure, until the dust settles’ proclamations as Fairfax tends to allow its subs, which include Crum and Forster and Odyssey Re, to chart their own course.
Feb
19
Joe– count me as one Zenith stockholder and former Zenith employee who thinks this is great news. Zenith represents a rarity in American business– a company that sticks to its knitting, does what it does very, very well, and doesn’t try to get too big to keep doing things the right way. Stanley Zax has consistently been one of the most clearsighted CEOs in the P/C industry. This looks like a deal done for all the right reasons that is good for everyone. Bravo, Stanley!