Shareholder Adviser OK’s Allied’s Bid, But Nixes Approval by Transatlantic

September 15, 2011

Allied World Assurance Company Holdings, AG announced that Institutional Shareholder Services (ISS), an independent proxy advisory service, has “issued a report recommending that shareholders of Allied World vote in favor of all of the proposals associated with the merger with Transatlantic Holdings, Inc.”

That was good news for Allied World, as consummation of the merger agreement has been put into a great deal of doubt. Allied pointed out that the ISS report noted that the current exchange ratio is an attractive valuation for Allied World and ‘approval of the merger agreement between the company and Transatlantic warrants support.’

However, ISS also issued an advisory report to Transatlantic’s shareholders in which it advised them to reject the merger with Allied World, as two other advisory firms have done. In addition, Validus Holdings has filed a petition with the SEC as a first step in removing Transatlantic’s current board of directors. The board is scheduled to meet on Sept.20 to vote on the Allied World proposal.

Scott Carmilani, Chairman, President and CEO of Allied World, issued a statement backing his company’s bid. “We firmly believe that our merger-of-equals with Transatlantic will provide the most compelling strategic and financial benefits to shareholders of both companies,” he stated.

“We are very pleased that ISS has recommended that our shareholders vote in favor of the merger. With synergy estimates double that of our initial projections, integration planning well underway and a clear path to closing the transaction ahead of schedule and as early in the fourth quarter as possible, we believe the merger will result in significant value creation for shareholders of both companies.’

However, Carmilani’s company was less than pleased at the ISS recommendation to Transatlantic’s shareholders to reject the offer. “ISS recognizes the certainty and value of the Allied World and Transatlantic merger,” said the Allied World’s response. “However, by recommending a vote against the merger, Allied World believes ISS is asking Transatlantic’s shareholders to take the risk that a higher offer for Transatlantic will not emerge if the merger with Allied World is defeated.”

The bulletin also listed the expected synergies that it has pointed out will be achieved if its proposal is accepted by Transatlantic’s shareholders.

For its part Transatlantic issued a statement saying it was “disappointed with the ISS recommendation because a merger with Allied World would accelerate our ability to accomplish our strategic objectives.

“The Transatlantic Board of Directors entered into the merger with Allied World because we determined that this combination would enable Transatlantic to achieve our key strategic objectives, strengthen our franchise, offer our stockholders an exchange ratio that provided full and fair value, and better preserve our ability to return capital to stockholders while providing them with the ability to share in the long-term potential of the combined company. The Board continues to recommend that stockholders vote FOR the merger agreement with Allied World.”

Sources: Allied World Assurance and Transatlantic Holdings, Inc.

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