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TORONTO, Feb 17 (Reuters) - Fairfax Financial Holdings, the Canadian property and casualty insurer run bycontrarian investor Prem Watsa, said it would buy Brit Plc for some $1.88 billion to become one of the top fiveunderwriters on the Lloyd's of London market.
Watsa, a devotee of the value investing style favored byWarren Buffett, made billions for Fairfax by correctly callingthe 2008 financial crisis. He has slowly been growing Fairfax'spresence in Europe and recently announced deals to acquire muchof QBE Insurance Group's asset base in Eastern Europe.
The Brit deal comes a month after XL Group snapped upLloyd's of London's Catlin Group for $4.22 billion, andis the latest in a string of European insurance mergers as theregion's underwriters face tighter capital rules.
Analysts expect the consolidation activity to continue withLancashire Holdings, Amlin Plc and Novae Group, all seen as potential targets.
Brit shareholders will receive 305 pence per share in cash,comprising 280 pence in cash and an expected dividend of 25pence per Brit share for the year ended Dec. 31.
Brit shares jumped more than 10 percent to 303 pence, theirhighest since going public last year, on the London StockExchange on Tuesday. This was slightly below the offer price ata premium of 11.2 percent to Brit's closing price on Feb. 16.
Fairfax has received irrevocable undertakings to accept theoffer from entities managed by Apollo Global and CVCCapital Partners, which together own about 73 percentof Brit.
"Brit had only recently returned to the stockmarket and hadnot yet built real traction, so this represents an easy exit forits major shareholder," said Westhouse Securities analyst JoannaParsons, in a note.
Apollo and CVC, which acquired Brit in 2010, took it publiclast year, valuing it up to 960 million pounds ($1.48 billion).
Toronto-based Fairfax said Brit's growing global reach wouldcomplement its existing operations and allow it to diversify itsrisk portfolio. Brit underwrites a range of specialty policiesfrom energy and marine to insurance for horses and the launch ofspacecraft.
The acquisition is accretive to Fairfax on several metrics,including gross revenue per share and investments per share, itsaid in a statement.
Fairfax bought Brit's runoff business in 2012. In a runoff,a firm stops writing new business and only manages the existingbook until all the policies in that book expire. (Reporting by Euan Rocha in Toronto and Supriya Kurane andRicha Naidu in Bengaluru; Editing by Gopakumar Warrier and ChizuNomiyama)