Validus Seeks to Oust Transatlantic Board to Force $3.5 Billion Takeover

Validus Holdings Ltd. (VR) said it would seek to replace the board of Transatlantic Holdings Inc. (TRH) after the company didn’t accept its increased cash-and-stock bid of as much as $3.46 billion.

Validus will try to replace the board with three independent directors: Raymond Groth, Paul Haggis and Thomas Wajnert, the Bermuda-based company said today in a statement.

Under the latest offer, Transatlantic holders would receive 1.5564 Validus common shares and as much as $13 in cash for each share they own, the bidder said. The offer values the target company at as much as $55.35 a share, based on Validus’s $27.21 closing price yesterday. Transatlantic closed at $52.23 a share and had 62.5 million shares outstanding as of midyear.

“Our increased offer provides compelling value to Transatlantic stockholders,” Validus Chief Executive Officer Ed Noonan said in the statement. “Given these benefits to Transatlantic stockholders, we are confident Transatlantic stockholders will share our disappointment that the Transatlantic board has failed to accept our compelling increased offer.”

Validus would become the world’s sixth-largest reinsurer by completing the acquisition, the company said in July when it announced the plan. New York-based Transatlantic has spurned an offer from Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) and terminated an earlier deal to merge with Allied World Assurance Company Holdings AG.

Transatlantic said it is reviewing the latest offer and asked its shareholders to take no action while the company pursues confidential discussions with other parties.

‘Fully Committed’

“Transatlantic is fully committed to reaching a conclusion to this process expeditiously,” the company said in a separate statement today.

The previous offer included 1.5564 of Validus shares and $8 in cash for each Transatlantic share. The new offer increases the cash component to $11. The cash payment would be as much as $13 including a $2 dividend that would be reduced on a dollar- for-dollar basis from any funds used by Transatlantic for share repurchases made after Oct. 31, according to the statement.

With operations on six continents, Transatlantic sells reinsurance, or coverage for primary carriers to protect against the costliest property and casualty claims. The reinsurer was previously majority owned by bailed-out insurer American International Group Inc. (AIG), which sold its stake in public offerings in 2009 and 2010.

New CEO

A plan to merge with Allied World was scuttled in September after Transatlantic’s largest shareholder, Davis Selected Advisers LP, said it would oppose the deal. Transatlantic said CEO Robert Orlich would retire when it announced the deal with Allied World. After the deal fell apart, the company said he’ll step down at the end of the year and be replaced by Chief Operating Officer Michael Sapnar.

Transatlantic also walked away from a $3.25 billion all- cash bid from National Indemnity Co., a unit of Omaha, Nebraska- based Berkshire, saying the offer was a “substantial discount to book value” and wouldn’t “deliver fair value to stockholders,” according to a Sept. 19 statement.

Transatlantic disclosed Sept. 26 and Oct. 11 that it entered into confidentiality agreements with two additional, unidentified parties.

Private equity fund manager Christopher Flowers may be part of the group including Enstar Group Ltd. and C.V. Starr & Co. that’s in talks with Transatlantic, the Insurance Insider reported Oct. 11. The publication said in September that Joseph Brandon, the former CEO of Berkshire’s General Re, is also leading a group of investors.

Goldman Sachs Group Inc. (GS) and Moelis & Co. are providing financial advice to Transatlantic, and Gibson, Dunn & Crutcher LLP is acting as legal counsel. Validus has said it was getting financial advice from Greenhill & Co. and JPMorgan Chase & Co. (JPM) and legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.

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