Posted on 28 Sep 2011
A former government official who helped bail out the American International Group and a onetime head of General Re are part of a group that has begun merger talks with Transatlantic Holdings, people briefed on the matter told DealBook on Tuesday.
Transatlantic said on Monday that it has signed a confidentiality agreement and begun discussions with an unnamed third party, following a failed effort to merge with Allied World Assurance.
That consortium includes Dan H. Jester, a former Goldman Sachs official who worked at the Treasury Department under Henry M. Paulson Jr., and Joseph Brandon, who worked as General Re’s chief executive until 2008, said these people, who spoke on condition of anonymity because the talks were in a preliminary stage.
Should the investors make a bid, they will be competing against Validus Holdings, which is also in discussions with Transatlantic after having pursued a $2.96 billion hostile bid.
The Brandon-Jester group is being advised by Morgan Stanley, these people said.
Representatives for Transatlantic and Morgan Stanley declined to comment. Mr. Brandon and Mr. Jester were not immediately available for comment.
Should the new consortium make a bid for Transatlantic, it would turn up the heat in a deal race that appeared to have cooled down in recent weeks.
Transatlantic agreed to end its planned merger with Allied two weeks ago after shareholders objected to the tie-up. And sales talks with a unit of Berkshire Hathaway dissipated last week.
Validus has pursued Transatlantic since July, and by late last week appeared the most likely buyer if the reinsurance company’s board decided to sell.
But the emergence of the group led by Mr. Brandon and Mr. Jester could provide interesting competition. After joining Berkshire’s General Re in 1989,
Mr. Brandon worked his way up the ranks of the reinsurer, becoming chief executive in 2000. He was seen by many analysts as a potential successor to Berkshire’s chief, Warren E. Buffett.
But Mr. Brandon was forced to step down in 2008 after a scandal embroiled General Re. The reinsurer was accused of helping the American International Group artificially inflate its reserves by $500 million through a series of sham transactions.
Mr. Brandon was named as an unindicted co-conspirator, but he was never charged by federal prosecutors or sued by the Securities and Exchange Commission.
Mr. Jester, meanwhile, gained prominence with his work at the Treasury Department, where he helped plan the Bush administration’s bailout of the financial sector. Among his accomplishments was spearheading the bailout of A.I.G. — which happened to be a client of his during his time at Goldman as a financial institutions banker.
Since leaving the federal government, Mr. Jester has returned to his home in Texas, where he manages money, mostly his own.
Shares in Transatlantic were almost flat on Tuesday at $48.74. That gives the company a market value of about $3 billion, meaning that Mr. Brandon and Mr. Jester will have to assemble a sizable war chest to compete with Validus.
News of Mr. Brandon’s involvement in the investor group was reported earlier on Tuesday by Insurance Insider.