Berkshire Hathaway Chairman and CEO Warren Buffett is interviewed before lunch in New York in 2010.Seth Wenig/The Associated Press
Shares in reinsurer Transatlantic Holdings Inc. hit their highest level in nearly two weeks Monday after the company said it would open talks with Warren Buffett's Berkshire Hathaway Inc. on an unsolicited buyout offer.
Transatlantic shares rose 2 per cent to $51.13 (U.S.) in morning trading, drawing closer to Berkshire's $52-a-share offer. It is not known whether that offer is in cash, stock or both, though most investors and analysts assume it is in cash.
Transatlantic said Friday night it would enter into confidential talks with Berkshire's National Indemnity, further complicating what was already a highly involved deal.
In June, Allied World Assurance Co Holdings Ltd. and Transatlantic agreed on an all-stock deal that is now worth $2.96-billion. A month later, Validus Holdings Ltd. made its own unsolicited cash-and-stock offer, also worth $2.96-billion at Monday's prices.
In the meantime, Transatlantic and Validus have sued each other – some Transatlantic shareholders have sued as well – and the largest shareholder in Transatlantic has said he may oppose the Allied World deal.
One analyst said Monday the transaction could get more complicated still.
"We expect talks with Berkshire to progress, but would not rule out additional overtures from other parties," Standard & Poor's equity analyst Cathy Seifert said in a research note Monday.
Validus has argued that its offer gives Transatlantic shareholders the most upside of the three deals, since it includes a stock component. Allied World has relied on the synergies it says it will gain with a merger and a criticism of Validus's plan to boost Transatlantic's reserves.
While Berkshire has said next to nothing publicly about its own offer, its selling point seems to be price, since only its offer remains at a premium to Transatlantic's shares.