Why American Safety Insurance Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of American Safety Holdings (UNKNOWN: ASI.DL  ) finished up 21% today after Farifax Financial agreed to buy it out for $306 million, or $29.25 a share.

So what: Shares traded as high as $28.99 today but closed at $28.91, more than 1% below the buyout price. Fairfax, a subsidiary of Canadian Insurer Prem Watsa, plans to sell American Safety's reinsurance unit for $59 million to Tower Group International (NASDAQ: TWGP  ) , which gained 2.4% on the day. The deal will give Watsa $480 million to invest, and the company has a track record of growing through acquisitions. American Safety expects the transaction to close in the fourth quarter.

Now what: American Safety's board unanimously approved the purchase, so there don't appear to be any serious obstacles that would undo the deal. The acquisition certainly looks like a win for American Safety shareholders as shares, which had already hit an all-time high two months ago, soared 13% above that mark on the news. To follow American Safety as the deal proceeds toward closing, just add the company to your Watchlist here.


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