NEW YORK (Bloomberg) - Validus Holdings Ltd. said it will begin trading its stock for Transatlantic Holdings Inc shares at the original offer price, shunning a request from the target company’s board for a higher bid.The directors last week asked Validus to improve its counteroffer to derail the planned reinsurer merger between Transatlantic and Allied World Assurance Company Holdings AG.“On behalf of your stockholders, we would encourage you not to take further action against their best interests by attempting to set roadblocks in our path,” Validus CEO Edward Noonan said in a letter today to New York-based Transatlantic.Reinsurers are seeking to combine to gain scale and diversify risks from backing primary carriers against extraordinary claims. Validus is offering 1.56 common shares and $8 in cash for each Transatlantic share, for a value of about $3.5 billion based on stock prices when the bid was announced. Zug, Switzerland-based Allied struck a deal last month to exchange 0.88 of a share for each Transatlantic share in a deal valued at $3.2 billion based on prices at the time.The Validus offer to the board was structured so that Transatlantic shareholders avoid a tax penalty by being paid in stock. The benefit disappears if the board refuses to cooperate, Bermuda-based Validus said in a conference call on July 13.Transatlantic will file a recommendation within 10 days, the company said yesterday in a statement. Transatlantic reiterated its request that shareholders “take no action at this time” on the Validus offer.Allied said its mix of businesses make it a better fit for Transatlantic. Validus focuses on property coverage, including protection against catastrophes. Transatlantic provides medical- malpractice protection and guards corporate officers against lawsuits through so-called directors-and-officers coverage. Allied offers professional-liability coverage.Validus slipped 44 cents, or 1.6 percent, to $27.26 at 4:30 p.m. in New York Stock Exchange composite trading. Transatlantic dropped 55 cents to $51.95 and Allied fell 0.7 percent.Validus has broken up a planned merger of rivals before. It acquired IPC Holdings Ltd. in 2009 after derailing an agreement with Max Capital Group Ltd. A deal with Transatlantic will create the world’s sixth-largest reinsurer and the second-biggest in North America, behind Warren Buffett’s Berkshire Hathaway Inc, according to Validus.Transatlantic would have to pay a breakup fee of $115 million if it backs out of the Allied deal, it said last month in a conference call. Transatlantic was previously owned by American International Group Inc, which divested its stake to help repay its 2008 US bailout.Validus is getting financial advice from Greenhill & Co and JPMorgan Chase & Co and legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP. Goldman Sachs Group Inc and Moelis & Co are financial advisers to Transatlantic and Gibson, Dunn & Crutcher LLP is acting as legal counsel.Deutsche Bank AG acted as financial adviser to Allied, and Willkie Farr & Gallagher LLP and Baker & McKenzie provided US and Swiss legal counsel.