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Transatlantic Investor May Put the Kabosh on Merger with Allied World

Posted on 15 Jun 2011

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Investor Davis Selected Advisers LP of Transatlantic Holdings Inc. said it may oppose the reinsurer’s planned $3.2 billion merger with Allied World Assurance Company Holdings AG and approach other companies about alternatives.

Davis holds the largest stake in Transatlantic and “has serious concerns about the proposed transaction,” according to a filing with regulators today. Davis “may oppose the proposed transaction.” Tucson, Arizona-based Davis didn’t specify its reservations.

The stock deal values New York-based Transatlantic at 79 percent of book value, a measure of assets minus liabilities, said Jay Gelb, a Barclays Plc analyst, in a note to clients yesterday. The price may draw bids from other insurers and reinsurers, he said. The deal requires approval from both companies’ investors.

Davis may encourage the reinsurer’s management “to explore other strategic options to maximize shareholder value,” according to the filing. The investment group said it may have conversations with New York-based Transatlantic and third parties to maximize the company’s value.

Davis has a 24 percent stake. Its voting authority is limited through an agreement with New York insurance regulators. For stock beyond a 9.9 percent stake, Davis must vote proportionate to other shareholders, according to the filing.

The merger is expected to be completed in the fourth quarter, the companies have said. Jo Anne Barrameda, outside spokeswoman for Transatlantic, had no immediate comment.