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Allied World Doubles Projections for Cost Synergies on TransAtlantic Deal

Source: WSJ - Lauren Pollock

Posted on 08 Sep 2011

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Allied World Assurance Co. on Wednesday doubled its projection for cost synergies that can be achieved through a combination with reinsurer TransAtlantic Holdings Inc.

TransAtlantic has said it will hold a special meeting Sept. 20 to vote on the proposed deal. Berkshire Hathaway Inc. was said to be negotiating with Transatlantic on its rival offer to acquire the reinsurer, and Validus Holdings Ltd. has also attempted to thwart the Allied World bid with its own hostile offer.

Allied World now estimates an annual run rate of over $160 million in synergies, up from the $80 million originally projected. This new level of synergies represents an estimated capitalized value of $12.04 per adjusted share of TransAllied, an increase of $6.02 from what was originally projected.

"Having spent significant time with the TransAllied team since our announcement, both companies believe that these incremental merger synergies are achievable in a combination of Allied World and Transatlantic," Allied World Chief Executive Scott Carmilani said, adding the revised estimate remains conservative.

The Allied World agreement is an all-stock deal that would exchange 0.88 of an Allied World share, worth about $45.42 based on Wednesday's closing price, for each TransAtlantic share.

Berkshire had formally offered to buy TransAtlantic for $52 a share. The Validus offer would give 1.56 Validus shares and $8 in cash--together amounting to about $48.05 based on the closing price--for each TransAtlantic share