Berkshire Hathaway owned (re)insurer National Indemnity has offered $52 a share for Transatlantic Holdings, trumping the existing bids from both Validus and Allied World.
National Indemnity’s offer values Transatlantic at $3.25bn. Validus’s offer of 1.5564 Validus shares plus $8 in cash per Transatlantic share valued Transatlantic at $2.9bn as of 5 August, while Allied World’s offer of 0.88 Allied World shares per Transatlantic share valued the company at $2.76bn as of the same date.
Transatlantic said in a statement that it would consider this new proposal in consultation with its independent legal and financial advisers, but urged shareholders to take no action until the board had reached a decision.
“With your stock trading at $45.83, I have to believe that you will find our offer to buy all of Transatlantic shares outstanding at $52.00 per share to be an attractive offer," National Indemnity chief executive Ajit Jain wrote in a letter to Transatlantic CEO Bob Orlich.
National Indemnity’s offer has sparked responses from both the other suitors. Validus pointed out that Transatlantic has now received two offers that are valued more than Allied World’s. However, Validus chief executive Ed Noonan said: “While the National Indemnity offer acknowledges the value of the Transatlantic franchise, it fails to provide Transatlantic stockholders with any participation in the upside of the combined company. We believe Transatlantic stockholders deserve the right to choose for themselves between an offer that provides greater potential future value or a fixed price today.”
Although the two unsolicited bids are higher is value than Allied World’s initial offer, Allied World chief executive Scott Carmliani insisted a merger with his firm would be better overall.
"We reaffirm our full commitment to the terms of the Allied World/Transatlantic Holdings merger agreement. We believe this combination provides superior financial and strategic benefits and the opportunity for shareholders of both of our companies to participate in the considerable upside potential of the combined company,” he said. “In contrast, National Indemnity's proposal is, at best, opportunistic and seeks to acquire Transatlantic for cash at a significant discount to book value, leaving Transatlantic shareholders no upside potential.”
Transatlantic's book value a share at 30 June 2011 was $67.76, meaning that all three offers are a discount. Allied World's bid valued Transatlantic at $44.22 a share on 5 August, Validus's $46.37 and National Indemnity's $52.