December 8, 2023

DealBook: Alleghany to Buy Transatlantic for $3.4 Billion

Joseph Brandon, a former chief executive of General Re.General Re, via Bloomberg NewsJoseph Brandon, a former chief executive of General Re.

7:07 a.m. | Updated

The Alleghany Corporation announced on Monday that it would acquire Transatlantic Holdings for about $3.4 billion.

Under the terms of the proposed deal, Transatlantic shareholders would receive $59.79 a share. The company is working with Joseph Brandon, a former chief executive of General Re, and Dan Jester, a former Treasury Department official and onetime Goldman Sachs executive.

Alleghany’s offer already has the support of Davis Selected Advisers, Transatlantic’s biggest shareholder, with a voting stake of about 9.9 percent in the reinsurance 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.

A deal with Alleghany would bring to a close a months-long bidding war for Transatlantic, one that has drawn in the likes of Berkshire Hathaway and the private equity firm J. C. Flowers Company.

Transatlantic first announced a proposed $3.2 billion merger with another insurer, Allied World Assurance, in June. But Validus Holdings quickly swooped in with a higher bid and then took its offer directly to Transatlantic shareholders.

In August, National Indemnity, a unit of Berkshire Hathaway, bid $3.25 billion in cash as the value of both the Allied and Validus offers fell amid the sharp market volatility.

Shareholders, led by Davis, forced Transatlantic into ending its deal with Allied and opening up a broad sales process. National Indemnity’s bid, deemed by Transatlantic’s board to be too low and offering little future upside to shareholders, expired.

Other bidders emerged during the new sales process, including a consortium comprised of the insurer Enstar and the private equity firms J. C. Flowers and Stone Point Capital, according to people briefed on the matter. The Enstar group had placed an offer of about $60 a share in cash for Transatlantic, but was rejected because of opposition from the New York State Insurance Department, one of these people said.

The process has grown contentious over the months. On Friday, Transatlantic sued Validus, whose current bid is worth about $57.34 in stock and cash, over the unwanted bidder’s attempt to unseat its board.

Transatlantic favored Alleghany’s bid in part because it offered a large stock component, allowing current shareholders to benefit if the combined company performed well, this person added. Under the offer terms, Transatlantic would be run as an independent subsidiary. Mr. Brandon would become chairman of the Transatlantic board, and Michael C. Sapnar would step into the role of chief executive of the subsidiary in 2012.

Based in New York City, Alleghany is a collection of various insurance businesses, not unlike Berkshire Hathaway. 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, Morgan Stanley and the law firm Wachtell, Lipton, Rosen Katz. Transatlantic was advised by Goldman Sachs, Moelis Company and the law firm Gibson, Dunn Crutcher.

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