(Updates shares in the seventh paragraph.)
June 14 (Bloomberg) -- Transatlantic Holdings Inc. investor Davis Selected Advisers LP said it may oppose the reinsurer’s planned $3.2 billion merger with Allied World Assurance Company Holdings AG and approach other companies about alternatives.
Davis, which holds the largest stake in Transatlantic, “has serious concerns about the proposed transaction,” according to a filing with regulators today. Davis “may oppose the proposed transaction.” Tucson, Arizona-based Davis didn’t specify its reservations.
The stock deal values New York-based Transatlantic at 79 percent of book value, a measure of assets minus liabilities, said Jay Gelb, a Barclays Plc analyst, in a note to clients yesterday. The price may draw bids from other insurers and reinsurers, he said. The deal requires approval from both companies’ investors.
Davis may encourage the reinsurer’s management “to explore other strategic options to maximize shareholder value,” according to the filing. The investment group said it may have conversations with New York-based Transatlantic and third parties to maximize the company’s value.
Davis has a 24 percent stake. Its voting authority is limited through an agreement with New York insurance regulators. For stock beyond a 9.9 percent stake, Davis must vote proportionate to other shareholders, according to the filing.
The merger is expected to be completed in the fourth quarter, the companies have said. Jo Anne Barrameda, outside spokeswoman for Transatlantic, had no immediate comment. Faye Cook of Allied didn’t immediately respond to a message.
The deal values Transatlantic at $51.10 a share based on Allied’s June 10 closing price. That’s 16 percent more than Transatlantic’s close that day. Transatlantic rose $1.32, or 2.7 percent, to $49.51 at 4:15 p.m. in New York Stock Exchange composite trading. Allied advanced 58 cents, or 1.1 percent, to $56.02.
“Anybody else that would try to come in and break up this transaction, whether it would be going after us or going after Allied World, is probably going to have to deal with significant overlap,” said Thomas Cholnoky, senior vice president of investor relations with Transatlantic, in an interview yesterday. “Overlap always leads to a lot of business erosion as well as people erosion.”
Transatlantic provides medical-malpractice protection and guards corporate officers against lawsuits through so-called directors-and-officers coverage. Zug, Switzerland-based Allied offers professional-liability insurance. The combined company, to be named TransAllied Group Holdings AG, may expand accident- and-health coverage, Standard & Poor’s said yesterday.
Goldman Sachs Group Inc. and Moelis & Co. were financial advisers to Transatlantic, and Gibson, Dunn & Crutcher LLP and Lenz & Staehelin acted as U.S. and Swiss legal counsel. Deutsche Bank AG acted as financial adviser to Allied, and Willkie Farr & Gallagher LLP and Baker & McKenzie provided U.S. and Swiss legal counsel.
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