Property and casualty insurer Alleghany Corp. has agreed to buy the reinsurer Transatlantic Holdings Inc. in a cash-and-stock deal valued at about $3.4 billion.
The companies said Monday that the transaction values Transatlantic at $59.79 per share in cash and stock. That's a 10 percent premium to the company's $54.43 Friday closing stock price.
The acquisition will create a global specialty reinsurance company with significant underwriting diversification by product and geography, the two New York-based companies said.
Alleghany and Transatlantic had $4.7 billion in pro forma net premiums written for the year ended Sept. 30.
"The companies are complementary with virtually no overlap in their underwriting operations and have highly compatible cultures, which we believe will make integration seamless and efficient," Transatlantic Chairman Richard Press said in a statement.
Transatlantic had been courted by several businesses, receiving takeover offers from Validus Holdings Ltd. and a unit of Warren Buffett's Berkshire Hathaway Inc. , National Indemnity Corp. It also said in October that it had started confidential talks with an unnamed party.
Transatlantic provides reinsurance, which is purchased as a backup by primary insurance companies so the industry can cover big losses.
In October, Transatlantic and Switzerland-based Allied World Assurance Co. Holdings AG called off their deal to combine the companies. Transatlantic and Allied World did not specify a reason for calling off the deal, although they described it as a mutual decision.
In the deal with Alleghany, Transatlantic stockholders will receive 0.145 shares of Alleghany and $14.22 in cash for each share they own. Transatlantic shareholders may choose to receive either the cash or stock option.
Alleghany said the transaction will immediately add to its earnings per share once it is completed.
Transatlantic will become an Allleghany subsidiary once the deal closes. The acquisition, which is not subject to a financing condition, is expected to be completed early next year.
Upon the buyout's closing, Joseph Brandon will become president of Alleghany Insurance Holdings LLC, executive vice president of Alleghany and Transatlantic's chairman. Brandon is the former CEO of Berkshire Hathaway's General Re Corp.
Michael Sapnar will still serve as Transatlantic's president and become CEO on Jan. 1. He will take over the CEO post from Robert Orlich, who is retiring at the end of the year. Orlich will continue to serve as a board member and senior advisor to Transatlantic.
Alleghany's board will increase to 14 members from 11 members, with three additional independent directors being added from Transatlantic's current board.