TRH - Transatlantic Holdings

[Guest Hester]

twacowfca:

 

"BRK is about the only possible cash bidder for Transatlantic."

 

"The most compelling argument for a successful outcome for holding TRH is the incentivisation for TRH's management to get a deal done, preferably a solid cash offer rather than a stock deal of uncertain value."

 

"Mr.Orlich, TRH's CEO, has a large number of options that have not yet vested, and these would be worth very little now if they had already vested because the average strike price is mostly at or above the current market price.  However, if there is a change of control, as there would be with an acquisition, their CEO will receive a cash payment of over $17M in compensation for loss of the unvested options that are now of small value!  Other senior officers and managers will get similar payments of lesser amounts....The CEO will also receive his entire retirement package as a lump sum of $5M upon a change of control."  **********************************************************************************************************************************************

 

Wouldn't Buffett know this as well? We all know Buffett isn't very charitable when it comes to prices for acquiring companies, it seems like given all this and the fact that the stock prices of comparitive insurers have tanked lately, the urge for Buffett to raise his bid would be low. In fact it seems like he would even be in a place to lower his bid.

 

Plus given that the CEO's reward for just selling the company at any price is $22 million, and he only owns $25 million of stock, he is more incentivized to get a deal done at any price than wait for the best one on behalf of shareholders, and risk not getting or delaying the big lump sum for a few extra million.

 

I was thinking of buying but am now conflicted.

[tombgrt]

Exactly my thoughts Hester. I don't see any incentive for Buffett to raise his bid after he said himself that it expired. Why would he let his offer expire and then offer more later on when he knows his bid was much better than the alternatives? I would be very suprised if Buffett added another 10% to the expired bid. What the CEO says about the likelihood of a much higher price seems irrelevant and pure speculation.

 

I could be terribly wrong, but imo it just doesn't add up. Not anymore.

[twacowfca]

twacowfca:

 

"BRK is about the only possible cash bidder for Transatlantic."

 

"The most compelling argument for a successful outcome for holding TRH is the incentivisation for TRH's management to get a deal done, preferably a solid cash offer rather than a stock deal of uncertain value."

 

"Mr.Orlich, TRH's CEO, has a large number of options that have not yet vested, and these would be worth very little now if they had already vested because the average strike price is mostly at or above the current market price.  However, if there is a change of control, as there would be with an acquisition, their CEO will receive a cash payment of over $17M in compensation for loss of the unvested options that are now of small value!  Other senior officers and managers will get similar payments of lesser amounts....The CEO will also receive his entire retirement package as a lump sum of $5M upon a change of control."   **********************************************************************************************************************************************

 

Wouldn't Buffett know this as well? We all know Buffett isn't very charitable when it comes to prices for acquiring companies, it seems like given all this and the fact that the stock prices of comparitive insurers have tanked lately, the urge for Buffett to raise his bid would be low. In fact it seems like he would even be in a place to lower his bid.

 

Plus given that the CEO's reward for just selling the company at any price is $22 million, and he only owns $25 million of stock, he is more incentivized to get a deal done at any price than wait for the best one on behalf of shareholders, and risk not getting or delaying the big lump sum for a few extra million.

 

I was thinking of buying but am now conflicted.

 

Yes, that's a solid argument, but there are powerful forces that trump it.  

 

Orlich said after his talks with Ajit that he expects BRK to significantly improve the now expired BRK offer.

 

BRK puts a high value on maintaining a sterling reputation.  Taking advantage of TRH by coming back with a lowball offer not much different than the first offer that TRH expects to be improved significantly would be bad form to say the least.

 

A low second offer could be topped by the other two bidders, especially if the market rebounded.  It would be disagreeable to get into a public bidding war.

 

BRK's expired bid was actually less than the market value of Allied's bid when they made it, and it was accepted.  The shareholders, led by Davis Select Advisors, very likely will not approve that bid.  They would be disappointed to receive another bid that devalues their company, especially from BRK!  :)

[JAllen]

Berkshire and TransAtlantic are still negotiating.  It says so affirmatively in one of the filings today.....  The Allied vote occurs September 20th.

[twacowfca]

Berkshire and TransAtlantic are still negotiating.  It says so affirmatively in one of the filings today.....  The Allied vote occurs September 20th.

 

Yes.  BRK's first "bid" was a stalking horse bid to open the door and get close to Orlich.  It was not a bid capable of acceptance.  TRH' agreement to combine with AWH prohibits TRH from accepting a bid from another party before shareholders vote to approve or reject approval on Sept. 20, 2011.  BRK's "bid" did not specify terms.  It had a one day deadline, not necessarily requiring acceptance, but as stated to get " a response" from TRH. 

 

TRH's agreement with AWH prohibits them from talking with another possible suitor unless they first get a letter from the suitor like the letter BRK sent.  Then, with three days notice to AWH, they are permitted to open their books to the new suitor provided that TRH must give AWH a daily play by play of everything that goes on with the new suitor once their books are opened.  This was the legal object of the letter BRK sent, and that object was accomplished when Orlich sent a response refusing the price, but agreeing to begin negotiations under the impression that, as Orlich stated, the "offer" would be significantly improved.  :)

[Alekbaylee]

Big Transatlantic Shareholder Opposes Allied World Sale

 

http://blogs.wsj.com/deals/2011/08/24/big-transatlantic-shareholder-opposes-allied-world-sale/

 

Hopefully TRH & BRK make a deal shortly...

[twacowfca]

Big Transatlantic Shareholder Opposes Allied World Sale

 

http://blogs.wsj.com/deals/2011/08/24/big-transatlantic-shareholder-opposes-allied-world-sale/

 

Hopefully TRH & BRK make a deal shortly...

 

Still think it's very likely BRK makes an offer around BV they can't refuse.  But TRH can't accept another offer or promise another suitor another breakup fee until and unless AWH or TRH shareholders vote against the acquisition, according to the terms of their agreement. 

 

Making an offer now would give Allied or Validus time to counteroffer and raise their bids before BRK's bid could be accepted.  Therefore, a public, improved offer by BRK just before the shareholder votes on Sept 20 looks like the most likely scenario.

 

An improved offer from BRK after the shareholders vote on Sept. 20 seems to have a probability that's almost as high. 

 

The probability that BRK would suddenly announce that they changed their mind and no longer are interested in TRH seems to be rather low because that would damage BRK's reputation and create the perception that they are no better than an opportunistic private equity fund.

 

The probability that TRH shareholders will approve the combination with AWH seems very low for many reasons: Davis opposition, likely opposition from ISS whose recommendation most funds will follow, and, not least, the current negative value in the AWH combination.

[JAllen]

But wouldn't BRK need to make the offer before the votes are submitted?  I wouldn't count on everyone changing their votes or even being able to if it was close to the actual votes.  I'm thinking of the mail-in voters......

[twacowfca]

But wouldn't BRK need to make the offer before the votes are submitted?  I wouldn't count on everyone changing their votes or even being able to if it was close to the actual votes.  I'm thinking of the mail-in voters......

 

There's gamesmanship in these situations.  Most funds who own the majority of shares will wait until ISS issues their recommendation.  Very likely it will be for disapproval.  Then, funds will almost certainly follow that recommendation, but likely wait till the last Friday before Sept. 20 or the following Monday to preserve optionality in case there is a significant last minute development.

 

Likewise, BRK will probably wait till sometime around then to raise their bid because TRH's board can't even vote on it till after their shareholders vote on Tuesday, Sept. 20, 2011.  However, BRK might wait till after the shareholders vote before improving their expired bid if it seems very likely that shareholders will disapprove the combination with AWH.

 

In the unlikely event that ISS recommends approval of the combination with AWH, BRK might immediately make a higher offer.

 

Of course, it's possible that BRK won't make a higher offer.  In my opinion, this is a low probability,< 0.2 or 0.1.

 

AWH and Validus don't have the coin to buy TRH.  Their stock is selling below BV.  Therefore, it would make no sense to use their stock to match a cash offer to acquire TRH for about TRH's BV.

 

Here's a hypothetical scenario, based on public information. 

 

TRH management strike a deal with AWH that will trigger the lucrative change of control provisions in their contracts that will provide many millions for TRH managers without jeopardizing their jobs, and with the possibility of resetting their contracts with even more benefits in the future.

 

Their largest shareholder with multigeneration history in P&C insurance is ticked off about the deal that adds no significant value to his holding.  He gets on the phone to WEB's Number One and asks if BRK would be interested in acquiring TRH for a fair price, meaning a minimum of about BV, in relation to similar, recent deals that have averaged 1.16*BV.  However, there is a problem.  TRH can't accept another offer unless shareholders first vote against the AWH combination.

 

Therefore, it makes sense for the largest shareholder to torpedo the AWH combination and encourage BRK to make a fair offer for TRH just before or soon after the vote when the TRH board can legally consider approval of another deal that will mean an even bigger payoff and a friendly new owner.

 

Alternatively, upon receipt of a superior bid, the TRH Board can make an adverse recommendation to its shareholders, before the shareholders vote, to turn down the AWH agreement , provided that it tells AWH about the terms and price of any new offer received from a different party that it thinks is a superior proposal and gives AWH three days to sweeten the existing agreement to compete with the new offer.  :)

[Alekbaylee]

Allied set to up its bid (rumors)

 

http://www.royalgazette.com/article/20110901/BUSINESS04/709019941

 

[twacowfca]

But wouldn't BRK need to make the offer before the votes are submitted?  I wouldn't count on everyone changing their votes or even being able to if it was close to the actual votes.  I'm thinking of the mail-in voters......

 

There's gamesmanship in these situations.  Most funds who own the majority of shares will wait until ISS issues their recommendation.  Very likely it will be for disapproval.  Then, funds will almost certainly follow that recommendation, but likely wait till the last Friday before Sept. 20 or the following Monday to preserve optionality in case there is a significant last minute development.

 

Likewise, BRK will probably wait till sometime around then to raise their bid because TRH's board can't even vote on it till after their shareholders vote on Tuesday, Sept. 20, 2011.  However, BRK might wait till after the shareholders vote before improving their expired bid if it seems very likely that shareholders will disapprove the combination with AWH.

 

In the unlikely event that ISS recommends approval of the combination with AWH, BRK might immediately make a higher offer.

 

Of course, it's possible that BRK won't make a higher offer.  In my opinion, this is a low probability,< 0.2 or 0.1.

 

AWH and Validus don't have the coin to buy TRH.  Their stock is selling below BV.  Therefore, it would make no sense to use their stock to match a cash offer to acquire TRH for about TRH's BV.

 

Here's a hypothetical scenario, based on public information. 

 

TRH management strike a deal with AWH that will trigger the lucrative change of control provisions in their contracts that will provide many millions for TRH managers without jeopardizing their jobs, and with the possibility of resetting their contracts with even more benefits in the future.

 

Their largest shareholder with multigeneration history in P&C insurance is ticked off about the deal that adds no significant value to his holding.  He gets on the phone to WEB's Number One and asks if BRK would be interested in acquiring TRH for a fair price, meaning a minimum of about BV, in relation to similar, recent deals that have averaged 1.16*BV.  However, there is a problem.  TRH can't accept another offer unless shareholders first vote against the AWH combination.

 

Therefore, it makes sense for the largest shareholder to torpedo the AWH combination and encourage BRK to make a fair offer for TRH just before or soon after the vote when the TRH board can legally consider approval of another deal that will mean an even bigger payoff and a friendly new owner.

 

Alternatively, the TRH Board can meke an adverse recommendation to its shareholders, before the shareholders vote, to turn down the AWH agreement, provided that, under the agreement's terms, it tells AWH about the price and terms of any new offer received from a different party that it thinks is a superior proposal and provided that TRH gives AWH three days to sweeten the existing agreement to compete with the new offer.  :)

 

The rumor about AWH preparing to sweeten the current agreement may be related to the provision in the agreement described in the last paragraph above.  :)

 

Therefore, we are revising the time frame prediction for when a positive development might occur.  Now, a favorable development in the next few days seems more likely than having to wait until around the time of the shareholders vote.  We are also increasing our probability estimate for a positive outcome and lowering the probability estimate for an unfavorable outcome.  0.97 - 0.90 is the new estimated range for the probability of a favorable outcome.  :)

[Alekbaylee]

ISS against TransAllied merger

 

ISS Proxy Advisory services has recommended that Transatlantic Holdings shareholders vote against a merger with Allied World Assurance Company.

 

ISS Proxy Advisory services has recommended that Transatlantic Holdings shareholders vote against a merger with Allied World Assurance Company.

 

The adviser said that bids from Validus and Berkshire Hathaway “cast doubt” on the superiority of Allied World’s bid. It said Transatlantic shareholders had a “better chance of maximising the value of their investment by voting down the AWH transaction”....

 

http://www.reactionsnet.com/Article/2898304/Sectors/23074/ISS-against-TransAllied-merger.html

[twacowfca]

ISS against TransAllied merger

 

ISS Proxy Advisory services has recommended that Transatlantic Holdings shareholders vote against a merger with Allied World Assurance Company.

 

ISS Proxy Advisory services has recommended that Transatlantic Holdings shareholders vote against a merger with Allied World Assurance Company.

 

The adviser said that bids from Validus and Berkshire Hathaway “cast doubt” on the superiority of Allied World’s bid. It said Transatlantic shareholders had a “better chance of maximising the value of their investment by voting down the AWH transaction”....

 

http://www.reactionsnet.com/Article/2898304/Sectors/23074/ISS-against-TransAllied-merger.html

 

This is not unexpected, but nevertheless very good news that all but nails the lid on the coffin of the ill advised AWH TRH combination.  AWH also released a statement on Sept, 8 that hypes supposed, increased synergies of the combination.  The AWH statement mentioned in passing that they would not offer improved terms to the merger agreement.

 

The importance of these developments is that the probability of a takeout of TRH at a price substantially higher than the present price continues to be extremely high, but the likely timeframe for BRK to make a cash offer once again shifts forward into the future a little bit, perhaps after the TRH shareholders meeting because the probability for approval of the AWH TRH combination is very low.

 

Mind that BRK have always preferred to strike a private deal with the willing management of a company that includes a breakup fee when making an acquisition.  TRH cannot legally finalize an acquisition by another organization until after the results of the TRH shareholders vote on the combination with AWH is decided. 

 

BRK has the inside track for the final run down the stretch to win the race to acquire TRH.  The management of TRH is highly incentivized to conclude another agreement to be acquired if the combination with AWH is voted down.  An offer to acquire TRH for stock in another company very likely would not add value to the TRH share price in this depressed market.  Validus has refused to sign a confidentiality and standstill agreement; therefore, there is no legal compulsion to negotiate with them.  A cash offer by any organization other than BRK would be uncertain to conclude and likely  fraught with financing risk.

 

Accepting a private cash offer to be acquired by BRK for a "fair" price at BV or a little higher, consistent with the prices of other, recent P&C acquisitions, is the sensible solution to the sticky wicket the TRH board will face if the TRH shareholders turn thumbs down on the combination with AWH.

 

By the way, there is a confusing headline and story put out by Bloomberg premarket, Sept. 12 saying that ISS recommends shareholder approval of the AWH TRH merger.  What the story, that was based on a press release issued by AWH, does not make clear is that that recommendation was made to AWH shareholders, not to TRH shareholders.  As stated above, ISS has made a strong recommendation that TRH shareholders vote against the agreement.

 

 

[Alekbaylee]

Not sure I get that...

 

Transatlantic Holdings, Inc. Comments on ISS Recommendation

 

Recommends Stockholders Vote “FOR” Proposed Transaction with Allied World

 

NEW YORK -- (Business Wire)

 

Transatlantic Holdings, Inc. (NYSE: TRH) (“Transatlantic”) today issued the following statement in response to Institutional Shareholder Services’ (“ISS”) recent report regarding Transatlantic’s proposed merger with Allied World Assurance Company Holdings, AG (NYSE: AWH) (“Allied World”):

 

We are disappointed with the ISS recommendation because a merger with Allied World would accelerate our ability to accomplish our strategic objectives. The Transatlantic Board of Directors entered into the merger with Allied World because we determined that this combination would enable Transatlantic to achieve our key strategic objectives, strengthen our franchise, offer our stockholders an exchange ratio that provided full and fair value, and better preserve our ability to return capital to stockholders while providing them with the ability to share in the long-term potential of the combined company. The Board continues to recommend that stockholders vote FOR the merger agreement with Allied World.

 

As previously announced, Transatlantic entered into a definitive merger agreement with Allied World on June 12, 2011, under which Transatlantic and Allied World would combine in a merger of equals, with stockholders of Transatlantic receiving 0.88 Allied World common shares for each share of Transatlantic common stock (together with cash in lieu of any fractional shares). The Transatlantic Board of Directors reaffirms its recommendation of, and its declaration of advisability with respect to, the Allied World merger agreement.

 

Transatlantic stockholders who have questions or need assistance in voting their shares should contact the Company’s proxy solicitor, Georgeson, Inc. at 888-613-9817 (toll-free), or email transatlantic@georgeson.com.

 

Goldman, Sachs & Co. and Moelis & Co. LLC are acting as financial advisors and Gibson, Dunn & Crutcher LLP is acting as legal counsel to Transatlantic.

[twacowfca]

TRH is compelled under the terms of the merger agreement with AWH to continue to support the merger.  The only exception would be if they receive an official offer from a competitor that is good enough for them to be persuaded that the competing offer is clearly superior.  In that event, TRH would have the option to issue an adverse opinion against the AWH merger. 

 

It's possible, and I think likely, that they do have the outline of a clearly better offer from BRK because there has been no announcement that their ongoing negotiations have terminated.  If that is the case, I think BRK would prefer to conclude an agreement with TRH after the TRH shareholders vote.  Hopefully, the vote will be against the AWH merger as ISS recommends. 

 

In that event, BRK would have a signed agreement with TRH that includes a breakup fee.  That would preclude getting involved in a messy auction with competing bidders as would happen if BRK made an improved, official offer at a higher price before the TRH shareholders vote.  Keep in mind that TRH is prohibited from accepting any competing offer unless and until their shareholders vote against the merger with AWH.  :)

[twacowfca]

TRH is compelled under the terms of the merger agreement with AWH to continue to support the merger.  The only exception would be if they receive an official offer from a competitor that is good enough for them to be persuaded that the competing offer is clearly superior.  In that event, TRH would have the option to issue an adverse opinion against the AWH merger. 

 

It's possible, and I think likely, that they do have the outline of a clearly better offer from BRK because there has been no announcement that their ongoing negotiations have terminated.  If that is the case, I think BRK would prefer to conclude an agreement with TRH after the TRH shareholders vote.  Hopefully, the vote will be against the AWH merger as ISS recommends. 

 

In that event, BRK would have a signed agreement with TRH that includes a breakup fee.  That would preclude getting involved in a messy auction with competing bidders as would happen if BRK made an improved, official offer at a higher price before the TRH shareholders vote.  Keep in mind that TRH is prohibited from accepting any competing offer unless and until their shareholders vote against the merger with AWH.  :)

 

 

AWH's Chief Corporate Strategy Officer, Jack Sennott, was quoted today by Barclays as saying that the merger with TRH is unlikely to be approved.  :)

[onyx1]

Twacowfca -

 

With the AWH bid likely to fall away, are you short VR shares vs your TRH long to protect the risk of NICO droping their bid?

[twacowfca]

Twacowfca -

 

With the AWH bid likely to fall away, are you short VR shares vs your TRH long to protect the risk of NICO droping their bid?

 

No.  NICO is a willing buyer.  They don't have an official bid on the table, but I think it's likely that they have expressed interest in buying TRH for a "fair" price indirectly through their brokers since TRH began exploring "strategic options" early this year.  A "fair price" in today's market would probably be a little bit above BV for a company like TRH because lesser companies have sold for about BV recently.  When TRH announced the deal with AWH, the combination was not at a large discount to BV.  Therefore, what NICO likely would have paid as a premium to that deal was not large, and the likelihood that TRH managers would control the new combo, de facto, with all that means for job security, bonuses etc. meant a preference for the AWH combo.

 

Now, with the AWH deal all but buried, NICO is the only sensible option for a change of control event that will trigger the lucrative payments to TRH managers.  I think they will be highly motivated to conclude an acquisition by NICO lest they fall into the clutches of the detested Validus or another uncertain acquirer. 

 

NICO has stated that they want to conclude the proposed purchase of TRH ASAP.  NICO's modus operandi is to stay in the bidding behind the scenes in such situations and not walk away or threaten to walk away as other bidders often do.  This is how they were reported to act behind the scenes in the bidding for IPC three years ago which Validus won.  Afterwards, Validus fired the IPC managers.  That made Validus an undesirable suitor for future acquisitions.

 

Look at the motivators TRH managers face if the don't conclude a sensible deal that would enhance shareholder value quickly:

 

Possible revolt by their disgusted shareholders.

 

Possible loss of their jobs

 

Loss of TRH board members reputation after the very critical advisory by ISS

 

Loss of opportunity to receive enormous change of control bonuses.

 

Increased risk of falling into the wrong hands if they are forced to auction the company

 

 

With all these motivators, it is most unlikely that they won't get taken out in the near future for a price that is likely to be  at or slightly above BV if TRH shareholders vote down the AWH combination as everyone expects them to do after the ISS issued the critical advisory.

 

:)

 

 

[onyx1]

Thanks for the feedback.

 

The incentives are clear for TRH to want to go with a sale to NICO.  Big payout, retain jobs, plus work for Buffett.  High fives around the room for the managers of TRH!

 

The incentive for NICO to want to bring in $9bln of long-tail net reserves is also clear.  Earning 4% on a 3.5 year duration nets an after-tax $12/share value to NICO if TRH were put into runoff (which won’t be the case).  If NICO expects no adverse development, a bid at TBV ($67.50 at Q2, but probably over $68 with fixed income rally to date) seems plausible. 

 

What concerns me is a DD discovery of poor quality control, fraud, or something NICO doesn’t like that causes them to walk from the $52 bid.  Admittedly this low probability and would have to be a huge development since there is another $16/share discount to TBV in their current bid.  Added up I figure at $52/share there is a margin of safety on reserves of 25% if you include the pre-tax value of the net reserves.

 

[twacowfca]

Thanks for the feedback.

 

I appreciated the clear incentives for TRH to want to go with a sale to NICO.  Big payout, retain jobs, plus work for Buffett.  High fives around the room for the managers of TRH!

 

The incentive for NICO to want to bring in $9bln of long-tail net reserves is also clear.  Earning 4% on a 3.5 year duration nets an after-tax $12/share value to NICO if TRH were put into runoff (which won’t be the case).  If NICO expects no adverse development, a bid at TBV ($67.50 at Q2, but probably over $68 with fixed income rally to date) seems plausible. 

 

What concerns me is a DD discovery of poor quality control, fraud, or something NICO doesn’t like that causes them to walk from the $52 bid.  Admittedly this low probability and would have to be a huge development since there is another $16/share discount to TBV in their current bid.  Added up I figure at $52/share there is a margin of safety on reserves of 25% if you include the pre-tax value of the net reserves.

 

BRK will probably manage them the way they worked with Gen Re: require them to shoot for a CR of about 1.00 and gradually wind down whatever percentage of their business is necessary to achieve that goal.  Nevertheless, this won't require layoffs because TRH is a fairly lean organization.  Keeping key staff like their 100 experienced underwriters would be wise because the market could turn hard, and this would enable them to ramp up instead of wind down their business. 

 

There is additional value for BRK.  The rationalization of rates that will happen as TRH passes on some of their less profitable business will help other reinsurers too.  :)

[Alekbaylee]

Guys, I would be happy with $58. Now, I would be much happier if I were wrong and you're right of course... ;)

[shalab]

I would be happy with $52  ;D

[S2S]

Thanks for the regular updates, twacowfca.

 

Steven Davidoff ("The Deal Professor") more or less agrees with your take:

http://dealbook.nytimes.com/2011/09/14/transatlantic-suitors-wait-for-allied-deal-to-slip-away/?nl=business&emc=dlbka22

[twacowfca]

Thanks for the regular updates, twacowfca.

 

Steven Davidoff ("The Deal Professor") more or less agrees with your take:

http://dealbook.nytimes.com/2011/09/14/transatlantic-suitors-wait-for-allied-deal-to-slip-away/?nl=business&emc=dlbka22

 

That's a good article.  Only one point of serious disagreement.  BRK's initial, public bid had a 24 hour time limit.  It has since expired.  That bid was consistent with what is called a stalking horse bid, kind of a lowball bid to open things up without giving a target a free put at a high price that the target can then use as a minimum price to shop around for a higher price from other interested buyers.

 

Davidoff seems to think that BRK's expired, $52 bid is a firm price.  That's absurd.  No sound P&C company with medium tail length reserves would rationally sell out for a cash offer without any  upside potential for a price equal to 77% of last quarter's BV when they could liquidate the company in a runoff for much more than that.

 

Davidoff also suggests that TRH may be slow walking the process of negotiating with BRK. That would be short sighted.  With Validus' CEO's nipping at their heels and trying to get TRH's shareholders to fire the TRH Board of Directors, it would make a lot more sense for TRH to fast track the talks with BRK once their shareholders vote down the AWH merger.  That would enable them probably to strike a fair deal with a hands off new owner that will please shareholders and result in the payment of their otherwise lost huge change of control bonuses.  :)

[onyx1]

http://ir1.transre.com/file.aspx?IID=103408&FID=11747942

 

 

On August 12, 2011, Transatlantic entered into a confidentiality agreement with National Indemnity Company ("National Indemnity"), a member of the group of insurance companies of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B).  Although the two companies have engaged in discussions, National Indemnity has been interested in conducting only very limited due diligence, focused solely on Transatlantic's Zurich subsidiary.  National Indemnity has conveyed to Transatlantic that it is unwilling to increase the terms of its proposal and is only interested in an acquisition at or below $52 per share.  The Transatlantic Board of Directors has concluded that selling Transatlantic for cash at such a substantial discount to book value would not deliver fair value to stockholders.  Transatlantic and National Indemnity remain under a confidentiality agreement, and, while further talks may occur, no further talks are currently scheduled.

 

Plus this....

 

 

The all-cash proposal from National Indemnity represents the less compelling of the two alternative transactions. 

 

Given our strong long-term prospects combined with the historically low valuations prevalent in the industry today, we believe that embarking on a process to sell the Company would not deliver appropriate value to stockholders.  In this environment, it is not surprising that reinsurance companies have not been selling themselves.  Even so, in keeping with our fiduciary responsibility, we would always give careful consideration to a sale proposal that could offer superior value to our stockholders. 

 

After reviewing the National Indemnity proposal, it was clear to the Board that this offer did not provide superior value – in fact, it was demonstrably inferior on most valuation metrics.  We received this proposal following a week in which the prices of insurance stocks declined significantly.  The indicated offer represented only 77% of our stated June 30, 2011 book value, and ranked below the 25th percentile of comparable insurance transactions(3) in key benchmarks based on analysis by our outside financial advisors (as highlighted on page 36 of our investor presentation filed on September 2, 2011). 

 

Nevertheless, we entered into a confidentiality agreement with a customary standstill provision.  Through several conversations, we encouraged National Indemnity to perform due diligence and meaningfully increase their offer -- they only conducted very limited due diligence and never improved their offer.  Our Board has concluded that selling Transatlantic for cash at such a substantial discount to book value, when our book value has been growing consistently, simply would not deliver fair value to our stockholders.  We conveyed our position to National Indemnity several times, most recently on Friday, September 9, 2011.  They reiterated that they remain potentially interested in an acquisition at or below $52 per share.  We continue under a confidentiality agreement, and while further talks may occur, none are currently scheduled.

 

 

And finally:

 

Fact:  Four external parties, including two independent actuarial firms, evaluated Transatlantic's reserves over the last 12 months.  All of these parties were comfortable with the adequacy of our reserves.