Validus CEO: Transatlantic Board 'Case Study In Poor Governance'
August 01 2011 - 9:49AM
Dow Jones News
Validus Holdings Ltd. (VR) Chief Executive Edward Noonan ramped
up the pressure on Transatlantic Holdings Inc. (TRH) to accept a
hostile takeover bid, saying the board's rejection is a "case study
in poor governance."
On a conference call early Monday for Transatlantic
shareholders, Noonan and Chief Financial Officer Joseph Consolino
outlined a series of reasons why they believe Validus's offer for
Transatlantic is superior to that of Allied World Assurance Co.
Holdings Ltd. (AWH), which Transatlantic previously accepted.
Noonan said Transatlantic's board is "ill-serving its
shareholders" in the proposed Allied World transaction, again
criticizing what he called Allied's "ever-increasing reserve
releases for earnings."
A representative for Allied World didn't immediately respond to
a request for comment.
The call followed a statement Sunday in which Validus attacked
the proposed deal, saying Allied World has weak long-term
prospects.
On the call, Noonan claimed that Allied's expense structure has
"ballooned" since it separated from American International Group
Inc. (AIG), adding that the company's gross premiums written grew
by 2.4% annually, while its general administrative expenses grew by
25% a year.
Noonan also said Allied World's high accident year loss ratio
and low interest rates make it "extremely challenging" for the
company to reach its own stated goal of a five-year average 9%
return on average equity.
Noonan reiterated that Validus is open to a "consensual
transaction," and said he believed that in the end, Transatlantic's
shareholders and not its board will decide the outcome of the
competing offers.
The Validus offer to Transatlantic investors would give them
1.56 Validus shares and $8 in cash for each Transatlantic share.
The offer valued the company at about $3.5 billion based on stock
prices the day the bid was announced in June. Allied, meanwhile,
would exchange 0.88 shares for each Transatlantic share in a deal
valued at $3.2 billion based on prices at the time.
-By Brett Philbin, Dow Jones Newswires; 212-416-2173;
brett.philbin@dowjones.com
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