Transatlantic to Pursue Better Validus Offer to Beat Allied
July 20, 2011, 8:17 AM EDTBy Noah Buhayar
(Updates with Validus comment in sixth paragraph.)
July 20 (Bloomberg) -- Transatlantic Holdings Inc., the reinsurer that agreed to merge with Allied World Assurance Company Holdings AG, said it will ask Validus Holdings Ltd. to improve its counteroffer.
“The Validus proposal is reasonably likely to lead to a superior proposal,” Transatlantic’s board said yesterday in a statement, announcing its intention to enter into discussions with Bermuda-based Validus.
Validus said last week it would pay about $3.5 billion in stock and cash for New York-based Transatlantic. The reinsurer agreed in June to merge with Allied in a stock deal valued at about $3.2 billion. That was opposed by some of Transatlantic’s largest shareholders, including Davis Selected Advisers LP, which held a 24 percent stake as of July 5.
Validus today urged Transatlantic holders to vote against the Allied deal. Validus remains “fully committed” to its proposal, the company said in a statement.
The Validus offer “does not constitute a ‘superior proposal’ under the merger agreement that Transatlantic entered into with Allied World,” the Transatlantic board said.
Allied agrees “that the unsolicited proposal set forth by Validus does not constitute a superior proposal,” Scott Carmilani, chairman and chief executive officer of the Zug, Switzerland-based firm, said in a statement yesterday.
Reinsurers with less than $4 billion in market value have been combining to gain scale and diversify their business mix. Validus Chief Executive Officer Ed Noonan said that larger reinsurers have an advantage over competitors.
Size Does Matter
“Size does matter in terms of your ability to take on risk and manage risk,” Noonan said in an interview on July 13. “Size and scale is an asset to the reinsurance business and it seems like increasingly more so with the passage of time.”
Transatlantic would have to pay a breakup fee of $115 million if it backs out of the Allied deal, it said last month in a conference call. Transatlantic was previously owned by American International Group Inc., which divested its stake to help repay a 2008 U.S. bailout.
Validus focuses on property coverage, including protection against catastrophes. Transatlantic provides medical-malpractice protection and guards corporate officers against lawsuits through so-called directors-and-officers coverage. Allied offers professional-liability coverage.
Validus is getting financial advice from Greenhill & Co. and JPMorgan Chase & Co. and legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP. Goldman Sachs Group Inc. and Moelis & Co. are financial advisers to Transatlantic and Gibson, Dunn & Crutcher LLP is acting as 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.
--With assistance from Brooke Sutherland in New York. Editors: Dan Reichl, Dan Kraut
To contact the reporters on this story: Noah Buhayar in Los Angeles at nbuhayar@bloomberg.net.
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net
