Specifying it was reasonably likely it can reach bid superior to its prior merger agreement with Allied World Assurance Co. Holdings Ltd, Transatlantic Holdings Inc. said it would discuss a merger proposal with Validus Holdings Ltd.
Allied World said later Tuesday it remained "fully committed to the terms" of its deal with reinsurer Transatlantic.
Last week, Validus proposed merging with Transatlantic in a deal worth $3.5 billion in cash and stock, aiming to scuttle a prior merger agreement between the reinsurer and Allied World Assurance.
Transatlantic and Allied had agreed in June to merge in a $3.2 billion stock-for-stock deal. That merger would offer Transatlantic new primary insurance operations and a bigger capital base outside the U.S.
Tuesday, Transatlantic said the Validus proposal didn't constitute a superior proposal as set forth in the Allied World merger deal. It said it remains committed to the Allied World merger terms.
But it added that "the board has also determined that the Validus proposal is reasonably likely to lead to a superior proposal and that the failure to enter into discussions regarding the Validus proposal would result in a breach of its fiduciary duties under applicable law."
As a result, the board planned to hold talks with Validus.