U.S. property and casualty insurer Alleghany Corp. said it would buy re-insurer Transatlantic Holdings (NYSE:TRH) for $3.4 billion in cash and stock, a day after a source told Reuters News Agency that Alleghany was close to a deal for the company.
“This transaction is an outstanding opportunity to create significant value for Alleghany and Transatlantic stockholders alike, as the unique and complementary strengths of our leading specialty insurance and reinsurance platforms provide all the ingredients necessary for superior performance,” Weston M. Hicks, chief executive of Alleghany, said in a statement.
The agreement puts an end to the months-long buyout battle for Transatlantic, which has been courted by Allied World Holding (NYSE:AWH), Validus Holdings Ltd. (NYSE:VR), National Indemnity, a unit of Warren Buffet’s Berkshire Hathaway (NYSE:BRK) among other suitors. Under the terms of the deal, Transatlantic shareholders will receive $14.22 in cash and 0.145 Alleghany shares for each share, for a total value of $59.79 per share. The price is at a premium of about 10% over Transatlantic’s Friday close of $54.43 on the New York Stock Exchange.
The deal with Allegheny could help Transatlantic (NYSE:TRH) ward off its rival Validus (NYSE:VR) which is trying a hostile takeover.
Transatlantic is one of the cheapest companies in the industry and its long-tail insurance lines, such as medical malpractice and workers’ compensation, are attractive to rivals more exposed to short-tail risks such as hurricane damage.
Shares of Transatlantic closed at $54.43 Friday on the New York Stock Exchange.
Based in New York City, Alleghany is a collection of various insurance businesses. As of Friday, its market value was about $2.7 billion. The deal carries a $115 million break-up fee.
Alleghany was advised by UBS (NYSE:UBS), Morgan Stanley (NYSE:MS) and the law firm Wachtell, Lipton, Rosen & Katz. Transatlantic was advised by Goldman Sachs (NYSE:GS), Moelis & Company and the law firm Gibson, Dunn & Crutcher.