Berkshire "Renews" Offer for TRH

[dcollon]

http://www.bloomberg.com/news/2011-09-19/berkshire-renews-3-25-billion-offer-for-transatlantic-that-expires-today.html

[rijk]

this is high stakes poker, whoever blinks, loses, the possibility of a higher offer seem neglectible while the possibility of acceptance also look slim considering buyer managements prior comments about the adequacy of this bid......

 

regards

rijk

[Alekbaylee]

This is weird. What's the point of renewing an offer at the same conditions? ???

[Grenville]

I was wrong, I really thought Berkshire would increase its bid since it is far below book. I wonder if their book isn't as good as they say it is....

[zarley]

Isn't this typical Buffett though?  Stories of this kind of deal making are all over The Snowball and the Lowenstein biography.  Clayton Homes jumps to mind, but there are countless others where Buffett makes a bid and refuses to budge, letting the other side sweat until they cave or go somewhere else. 

[enoch01]

I was wrong, I really thought Berkshire would increase its bid since it is far below book. I wonder if their book isn't as good as they say it is....

 

Their reserve revisions are pretty ugly.  I think book value is overstated right now.

[rijk]

this is starting to become an interesting opportunity

 

jain is saying that at 52, there is sufficient margin of safety, while it's for sale now below 48

 

is jain buying for the (investment value of the) float or for the insurance operations?

 

regards

rijk

[Viking]

BRK is trading today at around book value. Why pay anything close to BV for TRH? Instead, spend that money buying back BRK stock.

[Rabbitisrich]

This is weird. What's the point of renewing an offer at the same conditions? ???

 

My guess is that the protection of Berkshire's negotiating makes up for the loss of the TRH opportunity. It is an advantage for Berkshire dealmakers to be able to reference decades of behavior when saying, "This is our final offer."

[jlcawood]

And, according to Mesquita, this actual and then tacit large compensation arrangement was a key factor for TRH being highly motivated to reach an acquisition agreement relatively quickly after the AWH deal was rejected.  Also, I think the reason NICO dropped their cash offer without further negotiations was not necessarily to maintain the illusion that they never improve their offers, but because of their respect for Joe Brandon and their sense that Davis would prefer the upside of the offer from Allegheny under Brandon's leadership.  :)

 

 

Transatlantic May Give Retiring CEO $15 Million for Dedication

 

    Dec. 9 (Bloomberg) -- Transatlantic Holdings Inc. said retiring chief executive officer Robert Orlich will get a special payout that may be valued at as much as $15 million to ensure his "continued dedication" to the reinsurer.

 

Orlich, who announced his retirement plans in June, signed an agreement Nov. 20 entitling him to the award once he stops working at the end of the year, the regulatory filing last month shows. The executive, who spent 17 years at the helm of the New York-based reinsurer, struck the deal the same day Alleghany Corp. agreed to buy Transatlantic for $3.4 billion.

 

Transatlantic, once part of American International Group Inc., agreed to the payout “to foster a smooth transition of  leadership and management,” according to the filing. Orlich,  64, gets a $6.1 million payment over the course of the 30  months following his retirement, as well as car lease payments  and use of an office and administrative assistant for two  years.

 

“It could be that he had planned to retire but they wanted to accelerate,” said Paul McConnell, an Orlando, Florida-based executive compensation consultant at Board Advisory LLC. “It’s not one of the prettiest things in executive pay but it happens all the time.”

 

Because Orlich is retiring Dec. 31, he isn’t eligible for a so-called golden parachute severance payment, which is only available to executives still working the day a sale is completed. His compensation package for 2010 amounted to $9.6 million, according to data compiled by Bloomberg.

 

Orlich’s History

 

Orlich led Transatlantic as it became independent from AIG, which divested its majority stake through public offerings in 2009 and 2010. The reinsurer struck a deal with Alleghany after rebuffing offers from Validus Holdings Ltd. and Warren Buffett’s Berkshire Hathaway Inc. Transatlantic’s plan to merge with Allied World Assurance Co. Holdings AG was scrapped in September as shareholders of Transatlantic opposed the deal.

 

Orlich declined to comment. He successfully led “the company through several challenging industry cycles,” according to a statement from Transatlantic.

 

“The compensation detailed in the proxy reflects the critical leadership role he has played in Transatlantic’s success and the implementation of our succession plan,” Transatlantic said.

 

The vesting of restricted stock, usually canceled when an employee quits before the vesting period ends, is part of Orlich’s special payout. The company estimated in April that the value of the restricted stock would have been $8.9 million if he had left in 2010, and it hasn’t provided an updated estimate.

 

Alleghany plans to make Orlich a senior adviser to the company and include him on the Transatlantic board once it becomes a subsidiary. It hasn’t struck agreements or disclosed pay arrangements for those roles.

 

Transatlantic’s shares rose 0.6 percent to $54.51 at 10:30 a.m. New York time. Before today they were little changed since Nov. 18, the last trading day before the deal’s announcement.