Transatlantic Agrees to be Acquired by Alleghany for $3.4B

November 21, 2011

Transatlantic Holdings Inc., a reinsurer which has been at the center of a buyout battle, has now agreed to be acquired by Alleghany Corp.

The cash-and-stock deal is valued at around $3.4 billion. The announced deal could finally put to an end months-long takeover talks involving Transatlantic.

According to the two companies’ announcement Monday morning, Alleghany, a U.S.-based P/C insurer, valued Transatlantic at $59.79 per share, a hefty 10 percent premium over last Friday’s stock price.

The deal will create “an industry leader in U.S. excess and surplus lines and global specialty reinsurance with significant underwriting diversification by product and geography,” the two companies announced. The deal is expected to be completed during the first quarter of next year.

For the 12 month-period ended on September 2011, the two companies had pro forma net premiums written of $4.7 billion. They had total stockholders’ equity of $5.9 billion and total capital of $7.2 billion at the end of September.

When the deal is completed, Transatlantic will become an independent stand-alone subsidiary of Alleghany, according to the announcement. The companies expect Transatlantic to keep current financial strength ratings of “A+” from Standard & Poor’s and “A” from A.M. Best.

Alleghany CEO Weston Hicks said the deal is an outstanding opportunity to create significant value for Alleghany and Transatlantic stockholders, “as the unique and complementary strengths of our leading specialty insurance and reinsurance platforms provide all the ingredients necessary for superior performance.”

Transatlantic Chairman Richard Press added that its board directors unanimously concluded that partnering with Alleghany delivers “immediate value to our stockholders while providing a unique and compelling opportunity to create long-term value by combining the strength of the Transatlantic franchise and balance sheet with Alleghany’s leading U.S. specialty insurance platform and superior investment track record.”

The companies also said Joseph Brandon, former chief executive of Berkshire Hathaway’s General Re, will join the executive team. He will be president of Alleghany Insurance Holdings and executive vice president of the parent company Alleghany. He will also be Transatlantic’s board chairman.

Brandon, who was once seen as a contender to succeed Warren Buffett at Berkshire Hathaway, was reported in the media in September as working with Morgan Stanley on a potential buyout bid for Transatlantic.

Back in September, Transatlantic and Switzerland-based Allied World Assurance called off their previously announced merger deal. The two sides did not say why they were calling it off, except to say that the decision was mutual.

A number of companies have been expressing their interest in acquiring Transatlantic. They included Validus Holdings and National Indemnity Corp., part of Berkshire Hathaway.

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