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Transatlantic Interested In Talking Over Bid with Berkshire Hathaway's National Indemnity

Source: WSJ - Gina Chon & Erik Holm

Posted on 12 Aug 2011

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According to the Wall Street Journal, sources say that reinsurer Transatlantic Holdings Inc. planned to send a confidentiality agreement to Berkshire Hathaway's National Indemnity insurance business Thursday evening to see if officials there want to start talks about its offer for Transatlantic.

Transatlantic doesn't plan to impose a deadline on National Indemnity for signing the confidentiality agreement, but hopes National Indemnity moves quickly in light of two competing offers for Transatlantic, the people said.

It is unclear what National Indemnity will do; Berkshire is known to disdain bidding wars for companies. Ajit Jain, a possible successor to Warren Buffett as chief executive of Berkshire, is in charge of National Indemnity's efforts to acquire Transatlantic, and Mr. Buffett isn't actively involved, people familiar with the matter said. Mr. Jain didn't respond to a request for comment.

On Monday, Transatlantic said National Indemnity's offer of $52 a share was likely to lead to a "superior proposal" to its existing merger agreement with a competitor, but wasn't itself a superior proposal.

That response to Berkshire's offer from Friday left the door open to talks with National Indemnity, but Transatlantic stopped short of accepting its $3.25 billion bid, which trumped two earlier offers.

Transatlantic had already agreed in June to a stock-for-stock deal currently worth about $3 billion with one of those earlier bidders, Allied World Assurance Co. As part of the merger agreement with Allied, Transatlantic had to wait three business days from its response to the offer before it could begin talks with National Indemnity.

Because of Thursday's share price moves, another offer for Transatlantic from rival Validus Holdings Ltd. is also valued around $3 billion, erasing the initial premium of that deal to the Allied deal. The Validus offer is composed of stock and cash. While Berkshire hasn't discussed the make-up of its offer, Berkshire would typically use cash for a deal of this size.