US commercial automobile insurer Atlas Financial Holdings has signed a definitive agreement to acquire Camelot Services, and its lone insurance subsidiary, Gateway Insurance, for nearly $23m.

As per the terms of the deal, the purchaser will buy all outstanding common shares of the parent company, for a combination of cash and Atlas preferred shares, subject to final adjustment based on year-end financial results.

The acquisition will help strengthen its commercial automobile presence in 40 states, including California, the District of Columbia, Hawaii, Montana, Nebraska, North Dakota, South Dakota, Washington, and West Virginia According to the acquirer.

Expected to close during the first three months of 2013, the transaction is subject to customary closing conditions as well as regulatory approval of the change of control of Gateway.

Following completion of the deal, the acquirer will continue to manage Gateway’s public auto insurance business, through its current brand name, utilizing its best practices to enable seamless transition for existing customers and agents.

Established in 1946, Gateway offers automobiles insurance products in 46 states including the District of Columbia and currently underwrites approximately $10m of annual taxi and limousine net written premiums.

Sandler O’Neill + Partners provided financial advice and DLA Piper acted as legal counsel to Atlas, while StoneRidge Advisors served as financial advisor and Freeborn & Peters and Leo Law offered legal advice to the seller.