A unit of Warren Buffett's Berkshire Hathaway Inc made a $3.24 billion buyout offer for Transatlantic Holdings Inc, topping two existing rival bids for the reinsurer.
Transatlantic's board said on Sunday it would "carefully consider and evaluate" the $52-per-share offer by Berkshire unit National Indemnity Co.
Berkshire has given the reinsurer time until the close of business on Monday, August 8, to make a formal response to the offer.
Transatlantic has an agreement to be bought by Allied World Assurance Company Holdings Ltd in a deal currently worth $44.22 per share, or $2.75 billion.
Validus Holdings Ltd, meanwhile, launched a hostile bid for Transatlantic, with a proposal currently worth $46.36 per share, or $2.89 billion.
Allied World issued a statement on Sunday reaffirming that its combination with Transatlantic is financially superior and strategically beneficial to shareholders.
Validus Holdings also separately issued a statement on Sunday urging the board of directors of Transatlantic to enter into discussions with Validus after receiving the new Buffett proposal.
Today's news comes just days after Berkshire reported a larger second-quarter profit. On Friday, one analyst said the conglomerate had to find ways to start spending its $47.89 billion cash pile in order to grow.
Buffett, often called the "Oracle of Omaha," has talked about his desire to make more insurance acquisitions if he could find strong companies with competitive advantages.
"It would appear that given depressed markets they see an opportunity here," said Michael Yoshikami, president of YCMNET Advisers, a California wealth manager and Berkshire shareholder.
"Given the short time frame, Transatlantic has been given to respond, they are looking to press this on a short time frame; I don't sense a bidding war here," Yoshikami said.
Buffett's bid values Transatlantic's shares at $52 apiece, a 15 percent premium to Friday's closing price of $45.24 on the New York Stock Exchange.
On Sunday, Transatlantic's board backed its recommendation of the agreement with Allied World and advised shareholders to await the board's decision regarding the Buffett proposal before taking any action.
Goldman, Sachs & Co and Moelis & Co LLC are acting as financial advisers and Gibson, Dunn & Crutcher LLP is acting as legal counsel to Transatlantic.
THE FIGHT IS ON
Allied World and Validus have been canvassing shareholders to drum up support for their proposals.
Allied World has been making the case that its deal with Transatlantic would save money and create a company with a better risk profile, two sources told Reuters last month.
It says Transatlantic shareholders also would get a specialty insurance business with their plan, while the company would double down on reinsurance in the rival offer.
Validus has argued that its offer was still worth more than Allied World's, a third source told Reuters in July.
It was also raising questions about the industrial logic of the rival deal, arguing that Allied World's specialty insurance business competes with many reinsurance clients of Transatlantic, according to the source.
Validus is digging in for a long battle, as it did two years ago when it won a months-long bidding war for Bermuda reinsurance rival IPC, the source said.