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Validus prepares for final Transatlantic offensive

by Laura Board | Published November 14, 2011 at 1:19 PM

The final offensive in Validus Holdings Ltd.'s four-month battle for reinsurer Transatlantic Holdings Inc. could begin as early as next week as the Bermuda bidder seeks to persuade its target's shareholders to back its attempt to oust the Transatlantic board.

Transatlantic, of New York, set a so-called consent solicitation record date of Nov. 22. Pending final Securities and Exchange Commission clearance, it will allow Validus to start drumming up support for its boardroom coup, and with it, a sweetened offer it claims is currently worth $58 per Transatlantic share, or $3.58 billion. Receipt of the first consent back from a Transatlantic shareholder sets a 60-day clock ticking for Validus' campaign, meaning the hostile bid battle could end around late January.

Transatlantic rejected the offer on Nov. 4 and said it remains in talks with two other parties, one of which is reported to include Bermuda's Enstar Group Ltd., backed by J. Christopher Flowers and C.V. Starr & Co.

Validus' first public declaration of its interest in Transatlantic came on July 12 with a stock-and-cash offer worth $55.95 at that time. Validus had sought to break up Transatlantic's original June deal to be bought by Allied World Assurance Co. Holdings AG. In September, Allied pulled its offer by mutual consent. Soon after, Berkshire Hathaway Inc. subsidiary National Indemnity Co. was rebuffed by Transatlantic and walked away.

Validus wants to replace the Transatlantic board, led by chairman Dick Press and CEO Robert Orlich, with three nominees: Raymond Groth, Paul Haggis and Thomas Wajnert.

Validus' offer "provides compelling value to Transatlantic stockholders and a meaningful premium to Transatlantic's current market price," Validus chairman and CEO Ed Noonan said in a statement. "The setting of the record date allows us to move forward with the consent solicitation process to replace the Transatlantic board and empowers Transatlantic stockholders to exercise their rights. Transatlantic's stockholders, not the Transatlantic board, will have the right to determine the future of their investment."

Validus said it will file a final consent solicitation with the Securities and Exchange Commission "promptly" after Nov. 22 and will then begin a Transatlantic shareholder mailing.

Davis Selected Advisers LP, which holds 24% of Transatlantic but has regulatory restrictions on how it votes shares in excess of 9.9%, opposed a deal with Allied World. It has not made its intentions clear regarding the recent Validus proposal.

Validus' offer comprises 1.5564 Validus common shares per Transatlantic share plus $11 per share in cash. It also includes in its calculations a further $1.75 per share that would come from diverting Transatlantic cash used for share buybacks into a special dividend.

Transatlantic shares by midmorning in New York were up 44 cents at $54.91. Validus shares were up 29 cents at $29.07, giving it a market value of $2.88 billion.

Transatlantic's book value as of Sept. 30 was $69.67 per share.

Transatlantic is taking financial advice from Moelis & Co. LLC's John Binnie, John Sipp and Griff Norquist, and Goldman, Sachs & Co. Its lawyers include Gibson, Dunn & Crutcher LLP's Lois Herzeca, Peter Sullivan, Stephen Fackler and Romina Weiss.

Validus is being advised by Greenhill & Co.'s Robert Greenhill, Robert Smith, Steven Friedman, James Babski, Nick Bordignon and Dhruva Kaul, as well as J.P. Morgan Securities LLC.

It is taking legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP's Todd Freed and Stephen Arcano.

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Validus prepares for final Transatlantic offensive

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