Validus starts bidding war for Transatlantic Holdings, offers $3.5 billion

Validus Holdings Ltd. (NYSE: VR) has made an offer to acquire Transatlantic Holdings Inc. (NYSE: TRH) for $3.5 billion.
The Validus offer essentially starts a bidding war for Transatlantic, trumping a previously announced, $3.2-billion offer for Transatlantic in June 2011 by Allied World Assurance Company Holdings AG.
“Based on today’s closing prices, Validus’ proposal would provide total consideration of $55.95 per Transatlantic share, representing a 12.1% premium to the value of Transatlantic’s previously announced proposed acquisition by Allied World Assurance Company Holdings AG as of July 12, 2011,” Validus announced in a press release on July 13.
“In addition to the meaningful premium and cash consideration, the proposed transaction with Validus is structured to be tax-free to Transatlantic stockholders with respect to the Validus voting common shares they receive in the merger (unlike the fully-taxable proposed acquisition of Transatlantic by Allied World),” Validus added.
In a letter to Transatlantic from the Validus board chairman Edward J. Noonan, Validus outlines some of the strategic reasons for making its offer.
“The combination of Validus’ strong positions in Bermuda and London and Transatlantic’s operations in the United States, continental Europe and Asia would produce a rare example of a complementary business fit with minimal overlap,” the letter says. “This combination will produce a well-diversified company that will be a global leader in reinsurance.”
The letter says a Validus merger with Transatlantic would place the new entity in a Top 6 industry position. “Our merged companies would have gross premiums written over the last 12 months of approximately $6.1 billion as of Mar. 31, 2011.”
In contrast, Allied World writes $1.8 billion in gross premium written, and Transatlantic Re writes $4.1 billion.
A combined Allied-Transatlantic entity would have a total capital of $8.5 billion and total invested assets of $21 billion, according to Allied World.