Transatlantic Holdings has entered a confidentiality agreement and takeover discussions with would-be buyer National Indemnity.

National Indemnity, a subsidiary of Warren Buffett's Berkshire Hathaway, offered $52 a share in cash for Transatlantic on 5 August. Transatlantic had already entered into a merger agreement with Allied World Assurance in June, and received a counter-bid from Validus in July.

Transatlantic says that National Indemnity's offer does not constitute a superior to proposal to the Allied World merger, but that discussions are reasonably likely to lead to one. Allied World's stock-for-stock offer valued Transatlantic at $44.22 a share on 5 August. Validus's combined cash and stock offer valued the company at $46.37 a share on the same day.

Transatlantic says the terms of the confidentiality agreement with National Indemnity are largely similar to those governing its confidentiality agreement with Allied World, and so include a standstill provision.

The standstill provision proved an obstacle to talks between Transatlantic and rival suitor Validus. Validus rejected the provision, arguing that agreeing to it would have prevented the company from taking its offer direct to Transatlantic shareholders. Transatlantic countered that the provision was necessary to protect its confidential information.

Validus is now pursuing Transatlantic's shareholders directly, bypassing the board, although it remains open to engaging with the board.