KBW Discusses Transatlantic Holdings Merger

KBW is out with a research report on Transatlantic Holdings, Inc. TRH, as the company is merging with Allied World Assurance Co Holdings, AG. AH. It has a Market Perform rating and a $53 price target on Transatlantic Holdings. In a note to clients, KBW writes, "We believe the Transatlantic Board of Directors has a difficult decision in front of it, as we view both deals to have merit and potential value creation. Given the substantial decline in VR shares on Wednesday, there is now only a slight financial premium to the VR offer ($51.61 vs. $50.36, or 2.5% higher). We believe this slight premium is offset by the consensual nature of the AWH transaction, the similar cultures of AWH and TRH, and the numerous financial benefits outlined by AWH/TRH management on several occasions. As both deals currently stand, we do not see a compelling reason for the TRH Board to deem the VR offer as substantially superior, and we currently see a modestly higher likelihood of the AWH-TRH merger going through as planned. Given this expectation, we would be buyers of AWH and TRH shares (we reiterate our 12 month Market Perform rating and PT of $53 on TRH), while we remain neutral on VR shares, despite the sizable decline on Wednesday." Shares of TRH gained $2.52 yesterday to close at $51.54, a gain of 5.1%.