LONDON (The Deal) -- Less than a year after its London IPO, private equity-controlled Lloyd's of London insurer Brit (BRIT: LSE) has agreed to a takeover by Canada's Fairfax Financial Holdings (FRFHF) that values the company at £1.22 billion ($1.88 billion).

Fairfax will offer 280 pence in cash per share, plus a higher-than-expected 25 pence final dividend that was due to be announced when Brit reports full-year results on Feb. 25.

The offer is well above the 240 pence price of Brit's IPO last March, when CVC Capital Partners and Apollo Global Management (APO - Get Report) sold a minority stake, retaining 73.3% of the company, which they acquired for £888 million in 2011. Excluding the dividend, the offer amounts to a 2.1% premium on Monday's 274.2 pence close. Brit's shares were up more than 10% at 302.5 pence by late morning in London, just under the 305 pence total payout shareholders would get under the Fairfax deal.

Fairfax bought Brit's U.K.-focused Brit Insurance unit from CVC and Apollo for about $300 million in 2012. The financial investors also sold a regional U.K. business to a local arm of Australia's QBE Insurance Group (QBE: ASX) before the 2014 IPO.

Brit CEO Mark Cloutier will remain with the company after its takeover by Toronto-based Fairfax. Cloutier noted in a statement that the two companies have "very little crossover in our respective international operations, thus allowing Fairfax to further diversify its portfolio while enabling Brit to leverage Fairfax's existing relationships and expertise in the international insurance and reinsurance markets."

Fairfax Chairman and CEO Prem Watsa (pictured, above) said the acquisition will give Fairfax "a significant top five position at Lloyd's of London," and said the new Canadian parent will operate Brit on a "decentralized basis."

Apollo has agreed to tender its 39.7% stake, while CVC will hand over its 33.6% holding. Together with small shareholdings of Brit directors, that means Fairfax has 73.7% of its target in the bag.

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The offer is worth 1.73 times Brit's net tangible asset value of £704.4 million as of June 30, the companies said. That compares with the 1.61 times net tangible assets per share that New York-listed XL Group (XL) offered for Catlin Group (CLNGF) , whose £2.7 billion deal in early January marked the largest ever takeover agreement for a Lloyd's of London insurer.

That deal was swiftly followed by an agreement between New York-listed Axis Capital Holdings (AXS - Get Report) and PartnerRe (PRE) to merge, creating a company with a pro forma market value of $11 billion. The Brit takeover will likely give further impetus to deal-making in the reinsurance and specialty insurance sector.

Fairfax plans to finance the purchase from existing resources. The Toronto company had pretax profit of $2.34 billion last year and total assets of $36.13 billion as of Dec. 31.

Brit had gross written premiums of £701.2 million in the first half, and pretax profit before costs associated with its IPO of £96 million.

Advisers on the deal include RBC Capital Markets' Mark Preston, Alexander Thomas and Martin Frowde, and Oliver Hearsey for Fairfax, whose legal advice came from a Shearman & Sterling team that includes Jeremy Kutner, Laurence Levy, Thomas Donegan, Iain Goalen, Sarah Priestley, Chris Bright, Matthew Powell and Sam Whitaker.

Brit's financial advisers are JPMorgan Cazenove's (JPM - Get Report) Dwayne Lysaght, Mike Collar and Kamalini Hull; Numis Securities' (NUM: LSE) Charles Farquhar and Robert Bruce; and Willis Capital Markets' (WSH) Michiel Bakker and John Philipsz.

A Slaughter and May team led by Jeff Twentyman and Richard Smith and including Bertrand Louveaux, Jonathan Fenn, Roland Doughty and Jan Putnis is advising Brit. Mark Bergman and John Satory of Paul, Weiss, Rifkind, Wharton & Garrison are advising Brit on U.S. law.

Brit's in-house legal team is led by Tim Harmer.

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