Buffet’s rival bid for reinsurer is $3.25b

Globe Wire Services / August 8, 2011

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NEW YORK - A unit of Warren Buffett’s Berkshire Hathaway Inc. has bid $3.25 billion for the reinsurer Transatlantic Holdings.

Berkshire’s National Indemnity Co. is offering $52 per share in cash for Transatlantic. That tops the price the company would get in its agreement to be bought by Allied World Assurance Co.

Transatlantic’s shares have dropped 10 of the last 11 trading days.

“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 per share to be an attractive offer,’’ Ajit Jain, Buffett’s reinsurance lieutenant, said in a letter sent Friday to Transatlantic. The target company released the letter yesterday.

New York-based Transatlantic, the reinsurer previously owned by American International Group Inc., closed at $45.24 on Friday.

In the letter, National Indemnity said its offer is not subject to due diligence or financing conditions.

The company said it wants a formal response from Transatlantic no later than the close of business today.

If the offer is accepted, National Indemnity would want a $75 million break-up fee if the transaction did not close by the end of the year.

Transatlantic’s board said it would carefully weigh the offer by National Indemnity and asked its shareholders to wait until it has a chance to judge it before taking action.

But the company also reaffirmed its recommendation of the deal with Allied World Assurance, which is based in Switzerland.

Allied also backed its commitment to the deal in a statement issued yesterday and said it hopes to close the deal in the fourth quarter.

Under that agreement, Transatlantic and Allied World would combine in what the companies are calling a merger of equals. Shareholders of Transatlantic would receive 0.88 of an Allied World share for each share they hold of Transatlantic.

The companies say the deal, which calls for Transatlantic shareholders to receive a 58 percent stake in the combined company and for Transatlantic to name six of the 11 board members, would put them on better competitive footing because of the combined company’s larger size.

Allied World chief executive Scott Carmliani would head the combined company, and Transatlantic CEO Robert Orlich would retire.

Last month, Transatlantic rejected a hostile takeover bid from fellow insurer Validus Holdings Ltd. The board also adopted a one-year stockholder rights plan, commonly called a “poison pill,’’ a move used to avoid hostile takeovers.

In light of the latest offer from National Indemnity, Validus also issued a statement calling on Transatlantic to “remove the obstacles’’ it said were preventing shareholders from receiving the greatest value for their stock.

Berkshire is the largest US-based seller of reinsurance, which is coverage for primary insurance carriers. Buffett’s company had more than $47 billion in cash as of June 30.