Fairfax Trades Pet Insurance Holdings for Investments with JAB

Fairfax Financial Holdings has come to an agreement with JAB Holding Company, which will be acquiring all of Fairfax's pet insurance interests in exchange for, among other things, a $200 million investment in JAB's new consumer fund.

Canadian-based Fairfax is offloading their interests in the Crum & Forster Pet Insurance Group and Pethealth Inc. to JAB., best known for investing in Pret a Manger, Panera Bread, and Krispy Kreme. Crum & Forster is an umbrella company for brands such as the American Society for the Prevention of Cruelty to Animals (ASPCA) Pet Health Insurance, 24Petprotect, Spot Insurance Services, Pumpkin Insurance Services, and PetCoach, LLC, which provides PetCo's insurance plans. They also own Pets Plus Us in Canada. The price tag on these two pet insurance companies is $1.15 billion in cash and $250 million in seller's notes. This is on top of Fairfax's $200 million investment in JCP V, a buyout fund based out of Luxembourg and owned by JAB. They hope to bolster their portfolio with new pet insurance investments, as JCP V has also included pet insurance as a core feature in their portfolio. After the transaction is closed later this year, subject to regulations and terms, JAB's global pet insurance footprint will rake in revenues of $1.2 billion, with over two million pets insured.

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According to the Financial Times, this deal comes one week after the U.S. Federal Trade Commission (FTC) prevented JAB's acquisition of SAGE Veterinary Partners in order to stop the company from forming local monopolies in Texas and California. As a result, JAB was forced to divest their veterinary clinics in those areas. If JAB wants to acquire more emergency veterinary clinics, they'll have to get prior approval from the FTC, says Holly Vedova, Director of the FTC's Bureau of Competition. She told the Financial Times that overall, the FTC is working to prevent private equity firms from using “roll-up strategies” that allow companies to “accrue power” under the FTC's radar.