UPDATE – Validus Tops Allied World’s Bid for Transatlantic

July 12, 2011

Validus Holdings Ltd offered to buy reinsurer Transatlantic Holdings Inc for about $3.5 billion in cash and stock, trumping Allied World Assurance Co Holdings’ all-stock offer.

Validus offered 1.5564 in shares and a special dividend of $8 in cash for every Transatlantic share. The total per share value of $55.95 is a 14 percent premium to Transatlantic’s last closing price.

Allied World’s offer is currently worth $3.12 billion, or $49.91 a share, based on its Tuesday closing price.

Transatlantic, which was once controlled by American International Group Inc, had agreed to be bought by Allied World in June, creating a specialty insurer and reinsurer with broader reach and product offering.

Experts have been anticipating reinsurer deals, especially in Bermuda, for a while now, predicting that a soft pricing environment would prompt well-capitalized companies to merge.

In a letter to Transatlantic’s board, Validus CEO Edward Noonan said he has been interested in exploring a “mutually beneficial business combination” with Transatlantic for some time.

Validus had reached out to New York-based Transatlantic twice in June, the letter shows.

The company is prepared to take the offer directly to shareholders if needed, Noonan wrote in the letter.

Noonan said the company was willing to enter into merger agreement with Transatlantic substantially similar to the one with Allied World.

“The combination of Validus’ strong positions in Bermuda and London with Transatlantic’s profile in the United States, continental Europe and Asia will produce a rare example of a complementary business fit with minimal overlap,” Noonan said in a statement.

Bermuda-based Validus has made two big acquisitions in the last few years. In 2009, it bought property catastrophe reinsurer IPC Holdings for over $1.5 billion. Before that it bought specialty insurance group Talbot.

Greenhill & Co LLC and J.P. Morgan Securities LLC acted as financial advisers to Validus.

(Reporting by A. Ananthalakshmi in Bangalore; additional reporting by Siddharth Cavale; Editing by Richard Chang, Gary Hill)

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