Fairfax Financial Holdings Limited (FFH) Strikes Deal To Acquire Pethealth Inc. (PTZ)

Fairfax Financial Holdings Limited (TSX:FFH), a financial services holding company led by Prem Watsa, has agreed to acquire Pethealth Inc. (TSE:PTZ).

In a recent Form 6-K filed the U.S. Securities and Exchange Commission, Fairfax Financial Holdings Limited (TSX:FFH) said that it will acquire all of the outstanding preferred shares of Pethealth Inc. (TSE:PTZ) for a purchase price of $2.79 per share in cash, plus any dividends accrued but unpaid up to, but excluding, the day of closing.

The purchase price represents a premium of about 26% to the closing price of Pethealth Inc. (TSE:PTZ) common shares on the Toronto Stock Exchange (TSX) on August 29, and a premium of approximately 69% to the closing price of the company’s common shares on the TSX on August 15. It also represents a premium of approximately 69% to the company’s volume weighted average share price for the twenty trading days ending on August 15, 2014, and a premium of 36% to the all-time high price of the company’s common shares prior to such date.

Pethealth Inc. (TSE:PTZ) is North America’s second largest provider of medical insurance for dogs and cats to pet owners, operating in the United States, Canada and the United Kingdom. The company will receive a total cash consideration of about $100 million for its common and preferred shares and options.

The transaction, to be completed by way of a plan of arrangement, is subject to certain customary closing conditions, and is expected to close in the fourth quarter of 2014.

Pethealth Inc.’s (TSE:PTZ) board of directors recommended shareholders to vote in favour of the arrangement. However, Mark Warren, president, chief executive officer (CEO) and a director of Pethealth Inc. (TSE:PTZ), voted against the approval of the transaction. Warren owns approximately 9.7% of the outstanding common shares.

“Certain shareholders of [Pethealth Inc. (TSE:PTZ)], including certain directors, who in the aggregate beneficially own approximately 14.5% of the outstanding common shares and 40.4% of the outstanding preferred shares, have agreed pursuant to voting support agreements to vote their shares in favour of the arrangement unless the arrangement agreement is terminated,” according to the release.

The deal is subject to customary closing conditions, including court approval of the arrangement, the approval of the Pethealth Inc.’s (TSE:PTZ) shareholders voting as a single class, and regulatory approval in the United Kingdom.

Pethealth Inc. (TSE:PTZ) is expected to hold shareholder meeting in November 2014.

Disclosure: none