Property and casualty insurer Alleghany Insurance (NYSE:Y) reached a $3.4 billion deal on Monday to acquire Transatlantic (NYSE:TRH), ending a bidding war between a slew of rivals.
Alleghany agreed to pay $14.22 in cash and 0.145 of its shares per share of New York-based Transatlantic, which used to be owned by insurance giant American International Group (NYSE:AIG).
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That offer translates to $59.79 per share, representing a 10% premium on Transatlantic’s Friday close and exceeding a hostile offer from Validus Holdings (NYSE:VR) by almost $5.
“This transaction is an outstanding opportunity to create significant value for Alleghany and Transatlantic stockholders alike, as the unique and complementary strengths of our leading specialty insurance and reinsurance platforms provide all the ingredients necessary for superior performance,” Alleghany CEO Weston Hicks said in a statement.
Transatlantic had been in talks or even agreements with a number of other companies, including Warren Buffett’s National Indemnity and Allied World Holding (NYSE:AWH).
Earlier this year Transatlantic agreed to be acquired by Allied for $3.2 billion in stock, but that deal was scuttled by a $3.2 billion cash bid from Validus, which was rejected by Transatlantic.
Over the summer National Indeminty launched a $3.24 billion buyout bid for Transatlantic, but that too was turned down.
“We evaluated potential transactions based on several fundamental criteria, including the ability to offer compelling value to our stockholders, maintain strong ratings for Transatlantic, provide certainty of completion, and create significant upside potential for stockholders. A combination with Alleghany clearly meets these criteria,” said Transatlantic Chairman Richard Press.
Importantly, Transatlantic’s largest shareholder, Davis Selected Advisers, has already signed off on the Alleghany deal. “We applaud Transatlantic for conducting a thorough strategic process,” Davis Selected said in the statement.
Shares of Transatlantic climbed 1.07% to $55.00 Monday morning and hit a 52-week high of $56.03 earlier. On the other hand, Alleghany’s shares slumped 8.59% to $287.26.