Transatlantic Re, the reinsurer in the midst of a takeover tussle, gave short shrift to the restatement of a $3.25bn takeover offer from Berkshire Hathaway as it assessed its options following the collapse last week of a deal with peer Allied World.
Ajit Jain, the head of Berkshire’s reinsurance business, gave Transatlantic until the close of business on Monday to accept or decline the all-cash $52-a-share offer from Berkshire-owned National Indemnity.
However, Transatlantic dismissed the offer as opportunistic in a statement, saying that “selling Transatlantic for cash at the substantial discount to book value represented by the National Indemnity proposal simply would not deliver fair value to its stockholders”. The company would be open to discussions but none are scheduled, it added.
Berkshire, which has not conducted due diligence, has a history of making offers for companies it believes are undervalued but refusing to enter into negotiations.
A plan for Transatlantic to merge with Allied World collapsed last week following opposition from Transatlantic’s largest shareholder, Davis Advisors, and a recommendation by Institutional Shareholder Services that its clients reject the deal.
Meanwhile Validus, another competitor, has made a hostile cash and stock bid for Transatlantic at similar valuation to the failed Allied deal.
People familiar with the matter said the demise of the Allied transaction could yet flush out interest from other potential buyers for Transatlantic. National Indemnity’s $52-a-share cash bid is pitched at only about 75 per cent of Transatlantic’s book value, they added, after a long period of decline for valuations in the reinsurance sector.
Such depressed valuations suggest that Transatlantic’s board may prefer to have some stock in the deal, the people said. The end of the Allied World agreement has opened the way for Transatlantic to negotiate with Validus, if it chooses.
Validus last week asked shareholders to remove three members of the Transatlantic board and replace them with directors chosen by Validus.
Industry experts have pointed to the battle for Transatlantic as heralding a long-awaited period of consolidation in the reinsurance sector. Capital has flooded into the market following catastrophes in the past decade, prompting increased competition in underwriting and depressing rates.
Many reinsurers, they argue, are approaching the point at which they can no longer boost earnings by releasing reserves built up in the fruitful 2001 to 2005 period.
Shares in Transatlantic were down 2 per cent at $47.70 a share at lunchtime in New York.
Get alerts on Mergers & Acquisitions when a new story is published