* Allied to get $48.3 mln in breakup
* Leaves two other offers on table for Transatlantic
* Transatlantic names new CEO, to buy back shares
* Q3 earnings below Wall Street's worst-case figures
(Adds bid source, background; updates share prices)
By Ben Berkowitz
Sept 16 Reinsurers Allied World Assurance Co
Holdings Ltd (AWH.N) and Transatlantic Holdings Inc TRH.N
called off their merger on Friday in the face of overwhelming
opposition, and Transatlantic indicated it might remain
independent despite two higher offers on the table.
Five days after telling shareholders to accept Allied
World's all-stock offer of about $47 per share, Transatlantic
said it would be a disservice to them to accept a $52-a-share
cash offer from Warren Buffett's Berkshire Hathaway (BRKa.N).
A person familiar with the situation said the difference
between the two was a potential upside with the Allied deal --
shareholders had the chance to benefit from future gains.
However, Berkshire would buy them out at a discount and left no
potential for returns down the road.
Transatlantic was controlled by insurer AIG (AIG.N) until
2009, when AIG reduced its stake in an effort to raise capital
following a U.S. government bailout.
The New York-based company has been attractive to
competitors because of its depressed valuation. It also offers
reinsurers, with heavy exposure to short-term risks like
natural disasters, more exposure to longer-term lines of
business like medical malpractice and workers' compensation.
For a timeline on the Transatlantic bidding war, click
The failure of the Allied deal had been expected for days,
after three proxy advisory firms said Transatlantic
shareholders should reject the offer. Earlier this week, an
Allied executive told a Barclays Capital conference the deal
was unlikely to succeed.
Allied World said in a statement it would receive a $35
million break-up fee and $13.3 million in expenses from
Transatlantic. Transatlantic would owe Allied another $66.7
million if it entered into another deal within a year.
Allied World's all-stock offer was worth $2.94 billion, or
$47.05 a share, at Thursday's closing prices and represented a
roughly 5 percent discount to Transatlantic's share price.
Shareholders were due to vote on the agreement on Tuesday.
Transatlantic sent a letter to stockholders Friday, noting
"it will continue to entertain and evaluate any serious
proposal or opportunity that offers its stockholders full and
But it said the Berkshire offer "would not deliver fair
value to stockholders," and that Berkshire had been unwilling
as recently as last Friday to discuss raising its bid.
Transatlantic has also rejected a cash-and-stock offer from
Validus Holdings (VR.N), which took its bid directly to
shareholders in late July. Since then, the companies have sued
each other and Validus has filed to remove and replace
In response to the end of the Allied deal, Validus said it
welcomed "the opportunity to enter into discussions (with
Transatlantic) without any restrictive preconditions."
On the New York Stock Exchange, Transatlantic fell 3
percent, Allied rose 3.3 percent and Validus fell 2.6 percent
early Friday afternoon.
At Thursday's closing prices, the Validus deal is worth
$48.26 a share, or $3.02 billion. The Berkshire offer is worth
But both put Transatlantic at a substantial discount to
book value -- 0.71 times from Validus and 0.77 times from
Berkshire. The property and casualty insurance and reinsurance
sector has a median value of 0.84 times book, according to
Thomson Reuters data.
In the interim, Transatlantic said it will increase its
stock buyback program to $600 million, with a commitment to buy
back half of that this year.
Davis Selected Advisors, Transatlantic's largest
shareholder, endorsed both moves.
"Davis Advisors applauds Transatlantic's efforts to create
value for shareholders with an intelligent capital management
plan while at the same time remaining open to other strategic
alternatives," it said in the company's statement.
Transatlantic also said Chief Executive Robert Orlich would
retire as planned and that chief operating officer Michael
Sapnar would become CEO as of Jan. 1, 2012.
Transatlantic also released preliminary results for the
third quarter on Friday, saying it expected to report earnings
per share of 85 cents to $1.15 for the quarter. That is less
than the lowest of seven analysts' estimates for earnings
compiled by Thomson Reuters I/B/E/S.
(Reporting by Ben Berkowitz; Editing by Gerald E. McCormick,
Derek Caney, Dave Zimmerman, Gunna Dickson and Richard Chang)