PartnerRe savages Exor "unsolicited, inferior" bid - FREE

PartnerRe savages Exor "unsolicited, inferior" bid - FREE

june 15 coverCounting down until the July 24 shareholder vote, Partner Re has released yet another exhortation for shareholders to approve its board’s recommendation to merge with Axis Capital, citing the “unacceptable risks” posed by Exor’s hostile counter bid.

Slamming Turin-based Exor’s “inferior offer” with yet another publication, the reinsurance firm said Exor “consistently refuses to address serious risks and flaws in its illusory offer”.

PartnerRe’s board “urges shareholders to vote FOR amalgamation agreement with Axis Capital”, said the Bermudian reinsurer.

Publishing the information via its company website, “PartnerRe has provided additional details concerning the significant walkaway, regulatory and timing risks posed by Exor’s unsolicited and opportunistic offer for PartnerRe”.

Set against the board’s recommendation, Exor is also PartnerRe’s single biggest shareholder, its voting weighing in at a 9.38% of the company.The investment group has been equally vitriolic in its condemnation of PartnerRe's board and its proposed Axis deal.

Describing Exor’s bid as “inferior” rebuts the Italian investment firm’s earlier description of its $137.50 per share cash offer as “superior” to that earlier tabled by Axis.

“In addition to a wholly inadequate price, the Exor offer presents an unacceptable level of risk to PartnerRe and its shareholders relative to both the Axis Capital transaction and a standalone proposition. PartnerRe’s Board has reaffirmed its recommendation of the Axis Capital transaction, and urges all shareholders to vote FOR the amalgamation agreement with Axis Capital today,” said Partner Re.

In purely cash terms, Axis valued PartnerRe at roughly 10% cheaper than the Exor proposition, but the deal, which PartnerRe cites as an $11bn merger, has longer-term benefits, cited as a strategic merger to create economy of scale between two mid-sized Bermudian reinsurers, potentially creating a combined reinsurance group to rival the biggest firms.

That rationale comes in response to consolidating market pressures driven by cedant buying behaviour, with internationally-minded insurance groups preferring to purchase big reinsurance bundles, which only the uppermost tier of reinsurers can provide. 

“It would be irresponsible for the PartnerRe Board to abandon a transaction with compelling value and certainty to PartnerRe shareholders in favor of a potential transaction with substantial optionality, thereby exposing PartnerRe shareholders to the loss of any transaction and $315 million out-of-pocket expenses. The material risks inherent in Exor’s offer – which Exor has refused to address – and other important considerations for shareholders,” added the reinsurer.


PartnerRe logoPartnerRe’s top reasons cited for shooting down Exor’s hostile takeover attempt are headlined under “Walkaway Risk” to the firm.

“Negative developments in the protracted period to closing could cause Exor parties to walk away from its merger agreement.

“The Exor parties to its merger agreement are shell entities, allowing Exor to walk away from its proposed transaction with minimal risk to Exor.

“Exor’s ability and desire to close may be significantly impaired by financial pressures from substantial transaction leverage, its ability to raise cash, and its commitments to other investments (including Fiat Chrysler).”

The list continues with a bunch more, under “Regulatory Risk” section.

“Exor and its controlling shareholders have no contractual obligations to cooperate in obtaining regulatory approvals.

“Exor and its controlling shareholders are unknown to key regulators, which may result in a protracted and complicated regulatory approval process.

“Regulators and rating agencies likely will want to explore Exor’s intentions for PartnerRe particularly given frequent reports on Fiat Chrysler’s search for structural solutions to its ongoing challenges – will Exor move other assets into PartnerRe to expand its capital base and extract capital?

“Exor and its controlling shareholders have refused to give an absolute commitment to obtain regulatory approvals. If Exor and its controlling shareholders fail to obtain regulatory approvals, PartnerRe will lose the upside of the Axis Capital transaction as well as $315 million in Axor Capital termination fees.”

A third section, “Timing Risk and Unwillingness to Constructively Engage”, concludes the reinsurer’s list.

“The Exor offer will not close this year, while the Axis Capital merger of equals is on track to close in the third quarter.

“This protracted timeline and the walkaway risks in the Exor offer expose the PartnerRe business to the risk of a failed transaction through the renewals period which could be highly damaging.

“Exor has demanded that it receive all PartnerRe earnings post 2014 in excess of 70 cents per common share per quarter.

“Exor has repeatedly rejected the PartnerRe Board’s willingness to engage and negotiate despite a clear path to doing so, and Exor has consistently refused to address the serious flaws in its terms.”

By David Benyon - dbenyon@euromoneyplc.com

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