In a move the chief executive of Fairfax Financial Holdings Ltd. says reflects the company's strategy of investment in well-positioned companies, Fairfax and Zenith National Insurance Corp. have entered into an agreement to merge. Fairfax (TSX: FFH) is to acquire all Zenith shares for $38 per share in cash -- a premium of 31.4% to the closing price of Zenith (NYSE: ZNT) common stock on Feb. 17 -- putting the transaction value at about $1.4 billion (C$1.46 billion), according to a statement. Attempts to reach Fairfax for additional comment were not immediately successful. Zenith National Insurance Group, led by Zenith Insurance Co., primarily underwrites workers' compensation accounts for small to medium-size businesses, with California and Florida representing approximately 80% of direct business. Zenith's accounts are written in 45 states and are generated through approximately 1,500 independent agents and brokers, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database.Prem Watsa, chairman and chief executive officer of Fairfax, said in a statement Zenith has had an "outstanding long-term underwriting track record" for more than 30 years under the leadership of Stanley Zax, chairman and chief executive officer of Zenith. Following the completion of the merger, "there will be no changes in Zenith's strategic or operating philosophy," added Watsa.Zenith, which would become a wholly owned subsidiary of Fairfax, will continue to operate from its headquarters in Woodland Hills, Calif. The deal is expected to close in the second quarter pending approval of Zenith stockholders and regulators. The board of directors at Zenith unanimously approved the merger. Fairfax, a financial services holding company that operates in the property/casualty, reinsurance and investment management markets via subsidiaries, said it plans to finance its purchase of Zenith with a combination of holding company cash and subsidiary dividends and will raise $200 million through an equity issues before closing. This will leave Fairfax with about $1 billion in cash and marketable securities at the holding company level, it said. Zenith National Insurance Group currently has a Best's Financial Strength Rating of A (Excellent).In morning trading on Feb. 18, shares of Zenith National Insurance Corp. stock were selling at $37.77, up 30.65% from the previous close. Shares of Fairfax stock were selling at $369