NU Online News Service, Nov. 21 8:22 a.m.EST

Transatlantic Holdings is to become an independent subsidiary ofproperty and liability insurer Alleghany Corp. under the terms ofan agreement valuing Transatlantic at about $3.4 billion.

The companies in a joint statement said the combination will“create an industry leader in U.S. excess and surplus lines andglobal specialty reinsurance with significant underwritingdiversification by product and geography.”

The companies will have a combined $4.7 billion in net premiumswritten and total capital of $7.2 billion, they say.

“The companies are complimentary with virtually no overlapin their underwriting operations and have highly compatiblecultures, which we believe will make integration seamless andefficient,” says Richard S. Press, chairman of Transatlantic’sboard, in a statement.

Joseph P. Brandon, former chief executive of BerkshireHathaway’s General Re Corp. will serve as president of AlleghanyInsurance Holdings, executive vice president of the parent companyAlleghany, and chairman of Transatlantic’s board.

Transatlantic has been courted by several companies and had anagreement in place with Allied World Assurance until the twomutually agreed to terminate the deal.

Most recently the New York-based reinsurer was in talks withValidus Holdings, who made an unsolicited offer for Transatlanticas it tried to close the Allied World deal.

However, Validus and Transatlantic could never agree on the terms of a deal, as Validus attempted totake its offer directly to Transatlantic stockholders.

The companies’ negotiations included lawsuits against eachother, the latest being a suit filed by Transatlantic to blockValidus’ attempt at overthrowing Transatlantic’s board.

Transatlantic stockholder will receive aggregate considerationvalued at $59.79 per share in stock and cash, valued at $3.4billion.

Based on the closing price of Transatlantic stock on Nov. 18,the company’s deal with Alleghany represents a 36 percent premiumto Transatlantic’s stock price on June 10, just before the dealwith Allied World was ended.

The agreed-upon price represents a premium of 10 percent to theNov. 18 closing price.

The deal was heralded by Davis Selected Advisers,Transatlantic’s largest shareholder. The group did not have a favorable opinion of Transatlantic’s deal withAllied World. Additionally, the Kirby family, identified as having"longstanding ownership interests" in Allghany, is also on boardwith the deal, the companies say.

The deal is expected to close during the 2012 first quarter.