Allied World Assurance Co Holdings agreed to buy Transatlantic Holdings for US$3.2 billion in stock, creating a specialty insurer and reinsurer with broader reach and product offering.
Shareholders of Transatlantic, which was once controlled by American International Group Inc, will receive 0.88 Allied World share each, or US$51.10 per share, representing a 16.1 percent premium over Transatlantic’s close on Friday.
The deal allows New York-based Transatlantic to change domicile to Switzerland, where Allied World is headquartered and which is more favorable from a tax perspective, a source familiar with the situation said.
The deal also bolsters Transatlantic’s management.
Allied World chairman and CEO Scott Carmilani will be the president and chief executive of the new company. Transatlantic CEO Robert Orlich will retire when the deal closes, which is expected in the fourth quarter of this year.
AIG owned a majority stake in Transatlantic until it was forced to sell it off as part of its efforts to repay the US government for a massive crisis-era bailout.
Allied World and Transatlantic held one-on-one talks, which started earlier this year, the source said.
The combined company will operate under a holding company structure, with the corporate name TransAllied Group Holdings, -offering specialty insurance and reinsurance products and services via two brands — Transatlantic Reinsurance and Allied World Insurance.
Transatlantic shareholders will own about 58 percent of the combined company, with Allied World shareholders owning the rest. Both boards have approved the deal.
The combined entity will have total invested assets of US$21 billion, total shareholders’ equity of nearly US$7 billion and total capital of US$8.5 billion.
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