By Erik Holm
Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) is moving
forward with its effort to acquire Transatlantic Holdings Inc.
(TRH) by entering into discussions with the reinsurer,
Transatlantic said Friday.
The two companies signed a confidentiality agreement that allows
them to exchange nonpublic information, Transatlantic said. The
developments set the stage for Transatlantic to push for Berkshire
to boost its initial bid of $52 a share, or $3.25 billion.
Transatlantic had earlier agreed to a merger with rival Allied
World Assurance Co. (AWH). It said in a statement Friday it
"reaffirms its recommendation" of the Allied World deal to
shareholders for now.
The Transatlantic statement made no mention of a third bidder,
Validus Holdings Ltd. (VR), which launched a hostile takeover
effort in July after its approach was rebuffed by Transatlantic's
board.
Mr. Buffett, Berkshire's chairman and chief executive, is known
to disdain bidding wars for companies. But Ajit Jain, a possible
Buffett successor, put the company in the middle of one Friday,
Aug. 5 when he sent a letter to Transatlantic with Berkshire's
$3.25 billion bid. Jain gave the New York-based reinsurer three
days to respond. On Monday, Transatlantic said the offer was likely
to lead to a "superior proposal" to its existing merger agreement
with Allied World, but wasn't itself a superior proposal.
The Allied World agreement, an all-stock deal, was valued at
$2.92 billion based on Friday's closing share price. That is down
from its $3.2 billion value when the deal was announced in June
because of a recent decline in Allied World shares. The Validus
offer has declined in value to $2.93 billion from $3.5 billion.
The Berkshire unit that made the offer, National Indemnity,
signed a confidentiality agreement that is "substantially similar"
to the terms Allied World agreed to when it first entered into
negotiations, Transatlantic said Friday.
The agreement includes a "customary" standstill provision that
prohibits Berkshire from making an end-run around the Transatlantic
board.
Unspoken in the Transatlantic statement is that Validus has
refused to agree to a standstill provision, and has taken its
argument to court and directly to Transatlantic shareholders.
Transatlantic has not commented on the Validus suit; it has urged
its shareholders not to tender their shares.
Transatlantic said it has no plans to "comment further regarding
its discussions with National Indemnity unless and until required
by law or NYSE regulations."
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