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Transatlantic Rallies After Rejecting Berkshire Bid

Shares of Transatlantic Holdings jumped more than 3 percent Tuesday after the insurer rejected a $3.25 billion takeover bid from a unit of Warren Buffett's Berkshire Hathaway but agreed to talks with the company.

Warren Buffett
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Warren Buffett

Transatlantic said late Monday that the $52-per-share bidfrom Berkshire's National Indemnity did not qualify as a superior bid over its current deal with Switzerland-based Allied World Assurance, but because the bid might lead to a superior deal, the company agreed to talks and to exchange information.

National Indemnity has said its offer isn't subject to due diligence or financing conditions. If the offer is accepted, National Indemnity would want a $75 million break-up fee if the deal did not close by the end of the year.

Under the current deal between Transatlantic and Allied World Assurance , the two companies would combine in what they both call a merger of equals. Transatlantic shareholders would receive 0.88 of an Allied World share for each share they hold of Transatlantic.

The companies say the deal, which calls for Transatlantic shareholders to receive a 58 percent stake in the combined company and for Transatlantic to name six of the 11 board members, will put them on better competitive footing because of the combined company's larger size.

Allied World CEO Scott Carmliani would head the combined company, and Transatlantic CEO Robert Orlich would retire.

Last month, Transatlantic rejected a hostile takeover bid from fellow insurer Validus Holdings . The board also adopted a one-year stockholder rights plan, commonly called a "poison pill," a move used to avoid hostile takeovers.

In morning trading, Transatlantic shares rose $1.59, or 3.3 percent, to $49.90, while Berkshire shares rose $4,600, or 4.6 percent, to $105,600 and Allied rose $2.42, or 4.9 percent, to $51.95.