Transatlantic Is Sold To American Insurer
Alleghany Corporation announced today [Nov. 21] that it would acquire Transatlantic Holdings for about $3.4 billion, stymieing a longstanding hostile take-over bid for the New York reinsurer spearheaded by Bermuda’s Validus.
Under the terms of the proposed deal, Transatlantic shareholders will receive $59.79 a share.
Alleghany’s offer already has the support of Davis Selected Advisers, Transatlantic’s biggest shareholder, with a voting stake of about 9.9 percent in the reinsurance company, sources close to the deal have reported.
“This transaction is an outstanding opportunity to create significant value for Alleghany and Transatlantic stockholders alike, as the unique and complementary strengths of our leading specialty insurance and reinsurance platforms provide all the ingredients necessary for superior performance,” Weston M. Hicks, chief executive of Alleghany, said in a statement.
A deal with Alleghany brings to a close a months-long bidding war for Transatlantic, one that aside from Validuss drew in the likes of Allied World Assurance, Warren Buffet’s Berkshire Hathaway and private equity firm J. C. Flowers & Company.
Transatlantic first announced a proposed $3.2 billion merger with Allied World in June.
But Validus Holdings quickly swooped in with a higher bid and then took its offer directly to Transatlantic shareholders.
In August, National Indemnity, a unit of Berkshire Hathaway, bid $3.25 billion in cash as the value of both the Allied and Validus offers fell amid the sharp market volatility.
Shareholders, led by Davis, forced Transatlantic into ending its deal with Allied and opening up a broad sales process. National Indemnity’s bid, deemed by Transatlantic’s board to be too low and offering little future upside to shareholders, expired.
Other bidders emerged during the new sales process, including a consortium comprised of Bermuda insurer Enstar and the private equity firms J. C. Flowers and Stone Point Capital, according to business insider briefed on the matter. The Enstar group had placed an offer of about $60 a share in cash for Transatlantic, but was rejected because of opposition from the New York State Insurance Department.
The process has grown contentious over the months. On Friday, Transatlantic sued Validus over the unwanted Bermuda suitor’s attempt to unseat its board.
“We believe that this lawsuit is yet another attempt by Transatlantic to frustrate the ability of its stockholders to accept Validus’ compelling offer,” a Validus spokesman said.
Earlier Validus CEO Edward Noonan had said Validus was going to carry on with a campaign to take its offer directly to Transatlantic shareholders and to replace Transatlantic’s board.
Mr. Noonan [pictured] said last week, “Validus’ offer, which had a total value of $58.00 per Transatlantic share as of Friday’s market close, provides compelling value to Transatlantic stockholders and a meaningful premium to Transatlantic’s current market price.
“The setting of the record date allows us to move forward with the consent solicitation process to replace the Transatlantic board and empowers Transatlantic stockholders to exercise their rights. Transatlantic’s stockholders, not the Transatlantic board, will have the right to determine the future of their investment.”
But Transatlantic opted for Alleghany’s bid in part because it offered a large stock component, allowing current shareholders to benefit if the combined company performed well.
Under the offer’s terms, Transatlantic would be run as an independent subsidiary.
Based in New York City, Alleghany is a collection of various insurance businesses, not unlike Berkshire Hathaway. As of Friday, its market value was about $2.7 billion
