Alleghany Corporation acquires Transatlantic Holdings Inc. for $3.4 billion

Alleghany Corporation, a U.S. holding company, has acquired Transatlantic Holdings Inc. for approximately $3.4 billion.
Under the terms of the agreement, Transatlantic common shares will be exchanged for per-share consideration consisting of 0.145 Alleghany common shares and $14.22 in cash. Transatlantic stockholders may elect to receive cash or stock consideration, subject to proration in the event of oversubscription. The stock consideration is expected to be tax free to Transatlantic stockholders.
Based on closing market prices on Nov. 18, 2011, the transaction represents a 36% premium to Transatlantic’s closing stock price on June 10, 2011, the last trading day before public announcement of the since-terminated merger agreement with Allied World Assurance Company Holdings AG, and a premium of 10% to the Transatlantic closing stock price on Nov.18, 2011.
The transaction values Transatlantic at 86% of book value per share at Sept. 30, 2011.
After adjusting for subsequent share repurchases, the transaction is accretive to Alleghany’s Sept. 30, 2011 book value per share by approximately 7% and tangible book value per share by approximately 10%.
Following completion of the transaction, Transatlantic will become an independent stand-alone subsidiary of Alleghany. The companies expect that Transatlantic will maintain its current financial strength ratings of “A+” from Standard & Poor’s and “A” from A.M. Best, which will help Transatlantic preserve its franchise.
An Alleghany press release says the deal will create an industry leader in U.S. excess and surplus lines and global specialty reinsurance with significant underwriting diversification by product and geography.
For the 12 months, ended Sept. 30, 2011, the two companies had pro forma net premiums written of $4.7 billion. At September 30, 2011, they had total stockholders’ equity of $5.9 billion and total capital of $7.2 billion.