Just hours after First Mercury Financial Corp announced to be acquired for $16.50 per share by Fairfax Financial Holdings Limited investigations on behalf of investors of First Mercury Financial Corporation (NYSE:FMR) over possible breaches of fiduciary duties by certain directors and officers at First Mercury Financial Corporation in connection with the buy-out were announced.

The investigations by law firms concern whether First Mercury Financial Corporation and certain of its directors and officers breached their fiduciary duties owed to First Mercury Financial Corporation (NYSE:FMR) investors in connection with the proposed takeover.

On Thursday, Oct 28, 2010, after the market closed First Mercury Financial Corporation (NYSE: FMR) and Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) announced that Fairfax and First Mercury have entered into a merger agreement pursuant to which Fairfax Financial Holdings will acquire all of the outstanding shares of First Mercury Financial common stock. Under the agreement First Mercury Financial Corporation stockholders will receive $16.50 per share in cash, representing an aggregate transaction value of approximately $294 million.
First Mercury Financial Corporation said the price represents a premium of 45.2% to the closing price of First Mercury common stock on October 28, 2010, the day of this announcement, and a 67.3% premium to the closing price 30 days prior to the announcement of this transaction.

But the investigations by the law firm concern whether offered price and the sale process are unfair to the shareholders of First Mercury Financial Corporation (NYSE:FMR).

First Mercury Financials 12 month total revenue went from $127.25million in 2006 to $320.67million in 2009. Its Net Income went from $21,87million in 2006 to $44.36million in 2009. For the first two quarters in 2010 First Mercury Financial reported $71.82million, respectively $66.24million in total revenue. Its Net Income for the first two quarters was at $5.21million, respectively $4.14million.
Shares of First Mercury Financial Corporation (FMR) traded before the announcement at $11.36 per share and jumped in after hour trading after the announcement to $16.00 per share. FMR shares reached almost $20 per share in 2008 and traded during 2007 at almost $24 per share. In addition the Company reported a book value of $16.87 per share for the most recent quarter.
Furthermore Richard H. Smith, the Chairman, President and Chief Executive Officer of First Mercury, and Chairman Emeritus Jerome M. Shaw, a director and the founder of First Mercury, who together beneficially own approximately 17% of the outstanding shares of First Mercury common stock, have already agreed to vote their shares in favor of the merger.

Therefore the investigations concern whether the First Mercury Financial Board of Directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of First Mercury Financial Corporation (NYSE:FMR) and breached their fiduciary duties to First Mercury Financial Corp (NYSE:FMR) shareholder by failing to adequately shop the Company before entering into the transaction with Fairfax Financial Holdings Limited.