BOSTON -- Transatlantic Holdings Inc. agreed to be acquired by property and casualty insurer Alleghany Corp. in a $3.4 billion deal Monday, after months of jockeying for the reinsurer.
Transatlantic had announced in June that it agreed to combine with Switzerland-based Allied World Assurance Co. Holdings AG. While that transaction was pending, others stepped in with takeover bids for Transatlantic, including Validus Holdings Ltd. and a unit of Warren Buffett's Berkshire Hathaway Inc., National Indemnity Corp.
Transatlantic and Allied World called off their deal in mid-September, without specifying a reason for what they described as a mutual decision.
Monday's announcement of the transaction with Alleghany followed "a thorough and deliberate review," Transatlantic Chairman Richard S. Press said in a statement. He said his company's board unanimously concluded that the Alleghany deal "delivers immediate value to our stockholders while providing a unique and compelling opportunity to create long-term value."
Transatlantic announced in October that it had begun confidential talks with an unnamed party.
Transatlantic and Alleghany said their cash-and-stock transaction values Transatlantic at $59.79 per share. That's a 10 percent premium to the company's $54.43 closing stock price on Friday.
It's also higher than the $58 per share value that Validus Holdings cited in a Nov. 14 announcement about its latest offer.
It wasn't clear on Monday whether Validus might seek to make an additional bid. A phone message seeking comment with representatives of Bermuda-based Validus was not immediately returned.
Alleghany's acquisition of Transatlantic will create a global reinsurance company with significant underwriting diversification, the two New York-based companies said.
The two companies have almost no overlap in their underwriting operations, Press said.
Transatlantic's largest shareholder, Davis Selected Advisers, said the deal with Alleghany "makes great strategic sense."
Alleghany shares dropped $23.99, or 7.6 percent, to $290.27 in afternoon trading Monday, while Transatlantic shares rose 62 cents, or 1.1 percent, to $55.05.
Validus stock gained 53 cents, or 1.9 percent, to $29.18.
Transatlantic provides reinsurance, which is purchased as a backup by primary insurance companies so the industry can cover big losses.
Transatlantic will become an Allleghany subsidiary once the deal closes. The acquisition, which is not subject to a financing condition, is expected to be completed early next year.
Upon the buyout's closing, Joseph Brandon will become chairman of Transatlantic's board, as well as becoming president of Alleghany Insurance Holdings LLC and executive vice president of Alleghany. Brandon is the former CEO of Berkshire Hathaway's General Re Corp.
Michael Sapnar will still serve as Transatlantic's president and become CEO on Jan. 1. He will take over the CEO post from Robert Orlich, who is retiring at the end of the year. Orlich will continue to serve as a board member and senior advisor to Transatlantic.
Alleghany's board will increase to 14 members from 11 members, with three additional independent directors being added from Transatlantic's current board.
In the deal with Alleghany, Transatlantic stockholders will receive 0.145 shares of Alleghany and $14.22 in cash for each share they own. Transatlantic shareholders may choose to receive either the cash or stock option.
Alleghany said the transaction will immediately add to its earnings per share once it is completed.