Property and casualty insurer Alleghany Corp. (Y) has agreed to acquire reinsurer Transatlantic Holdings Inc. (TRH) for $59.79 per share in stock and cash, or about $3.4 billion, the two companies said Monday. The deal ends months-long takeover battle for Transatlantic, a former unit of American International Group Inc. (AIG).
Under the terms of the deal, Transatlantic shareholders will receive per-share consideration consisting of 0.145 Alleghany common shares and $14.22 in cash in exchange for each Transatlantic common stock held by them.
Transatlantic's shareholders had earlier rejected a merger with Switzerland-based specialty insurance and reinsurance company Allied World Assurance Co. Holdings AG (AWH) that was proposed in June.
The company has also rejected other bids from National Indemnity Co., a unit of billionaire investor Warren Buffett's Berkshire Hathaway Inc. (BRK-A,BRK-B), and insurance company Validus Holdings Ltd. (VR), which had gone hostile with its bid.
The Allegheny offer price represents a 36 percent premium to Transatlantic's closing stock price on June 10, 2011, the last trading day before the public announcement of the since-terminated merger deal with Allied World Assurance. It also represents a 10 percent premium to Transatlantic's closing stock price of $54.43 on November 18, 2011.
Alleghany has a market capitalization of $2.69 billion, while Transatlantic has a higher market capitalization of $3.36 billion.
The transaction, subject to regulatory approvals as well as approval by the stockholders of both companies, is expected to close in the first quarter of 2012. It is not subject to a financing condition.
Following completion of the transaction, Transatlantic will become an independent stand-alone subsidiary of Alleghany. The companies expect Transatlantic will maintain its current financial strength ratings of "A+" from Standard & Poor's and "A" from A.M. Best, which will help Transatlantic serve its franchise.
For the 12 months ended September 30, 2011, the two companies had pro forma net premiums written of $4.7 billion. As at September 30, 2011, they had total stockholders' equity of $5.9 billion and total capital of $7.2 billion.
Following the closing of the transaction, Joseph Brandon, former chief executive of Berkshire Hathaway's General Re Corp., will serve as president of Alleghany Insurance Holdings LLC, executive vice president of AIHL's parent company Alleghany, and also as chairman of Transatlantic's board.
Michael Sapnar will continue in his role as Transatlantic's President and will become CEO effective January 1, 2012. He will succeed Robert Orlich, who will retire as Transatlantic's CEO at the end of 2011 and will continue to serve as a director and senior advisor to Transatlantic.
Meanwhile, the board of Alleghany will be expanded to 14 directors from the present 11, with the addition of three independent directors from Transatlantic's current board.
Alleghany noted that members of the Kirby family with longstanding ownership interests in the company's common stock have agreed to vote in favor of the transaction.
Y closed Friday's trading at $314.26, up $1.79 on 6,600 shares, while TRH closed trading at $54.43, up $0.64 or 1.19 percent on 335,500 shares. In Monday's pre-market, TRH is adding $2.57 or 4.72 percent to $57.00.
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