The ongoing battle between Validus Holdings and Transatlantic is heating up again, as Validus announced a series of moves aimed at convincing Transatlantic’s shareholders to accept its merger offer.
On November 3, it amended its prior offer. On Nov. 4 it issued a statement to Transatlantic’s shareholders to the effect that its offer for the company presents “compelling value.”
When Transatlantic’s board told its shareholders that they shouldn’t support Validus’ proposal, Edward J. Noonan, Validus’ Chairman and CEO stated: “Despite months of deliberation, the Transatlantic board still fails to act to maximize value for Transatlantic stockholders by entering into a premium transaction with Validus. As we have said since the beginning of this process, we believe that the Transatlantic board should act in the best interests of its stockholders and we are fully committed to making our increased offer directly available to Transatlantic stockholders.”
In an open follow-up letter to Transatlantic’s shareholders, released yesterday, Nov. 7, Noonan repeated his call for them to accept Validus’ offer. The letter noted that Validus had “significantly increased its offer for Transatlantic,” which it said currently values the company at “$57.67 based on Validus’ closing share price on November 7, 2011.”
Validus is proposing to offer 1.5564 of its common shares per Transatlantic share, and “$11.00 in cash per Transatlantic share, an increase of $3.00 per share from Validus’ initial offer, through a pre-closing dividend financed from new borrowings; and an additional $1.75 in cash per Transatlantic share through a pre-closing dividend funded from available cash on hand at Transatlantic, subject to the impact of additional Transatlantic share repurchases described below.”
In addition Noonan’s letter points out: “As the Transatlantic board continues to repurchase Transatlantic shares from selling stockholders, the Transatlantic board is causing the aggregate amount available for the initially offered $2.00 cash per share pre-closing dividend, which would be paid to all Transatlantic stockholders in the Validus transaction, to be reduced on a dollar-for-dollar basis. Transatlantic’s share repurchases after October 31, 2011 through November 3, 2011 (based on publicly available information as of November 7, 2011), have already reduced the initially offered $2.00 additional dividend to $1.75.”
Validus said the increased offer “represented a 5.5 percent1 premium to Transatlantic’s closing share price on November 7, 2011, and a 31.0 percent premium to Transatlantic’s unaffected closing share price on June 10, 2011. Given the compelling value that our increased offer would deliver to Transatlantic’s stockholders, we question the Transatlantic board’s motivations in rejecting our offer,” Noonan wrote.
He also pointed out that, were the offer accepted, Transatlantic shareholders would have “a significant equity interest in the combined company, allowing you to share in the future upside potential of a larger and more attractively positioned business. We would also be able to provide Transatlantic stockholders with a tax-free transaction for the Validus share consideration, if the Transatlantic board were to cooperate with us. In addition, we believe that Validus’ increased offer clearly satisfies Transatlantic’s stated strategic objectives while a ‘go it alone’ approach does not.”
In going directly to shareholders, i.e. a hostile offer, Noonan stressed that “Validus board has approved an increase in the current Validus share repurchase authorization to an aggregate of $1.0 billion, contingent upon the consummation of the acquisition of Transatlantic,” adding that “Transatlantic stockholders, not the Transatlantic board, will decide the outcome.”
He accused Transatlantic’s board of being responsible for the protracted negotiations. Validus made a counteroffer on July 12, 2011, following Transatlantic’s acceptance of an offer from Allied World, which has since been cancelled. The bid soon turned hostile after the board had rejected it.
“Given that Transatlantic’s board has rejected the compelling value of our increased offer, we believe that you, the owners of Transatlantic, should have the right to determine the future of your investment and obtain the value of our increased offer,” Noonan continued. “To that end, Validus is taking its offer directly to Transatlantic’s stockholders through its Consent Solicitation to replace the Transatlantic board with three highly qualified and independent director candidates. He then gave details of the solicitation, which can be obtained on Validus web site.
Source: Validus Holdings
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