May 22, 2015 by Canadian Underwriter
PartnerRe Ltd. announced Friday it plans to “proceed to shareholder approval” of a proposal to merge with competitor Axis Capital Holdings Ltd., but Italian investment firm EXOR S.p.A. argues that EXOR’s all-cash US$6.8-billion offer to acquire PartnerRe “provides superior value and certainty,” compared to a merger with Axis, for PartnerRe shareholders.
Both Axis Capital and PartnerRe, based in Pembroke, Bermuda, offer commercial specialty insurance and reinsurance worldwide and have Toronto offices.
But Turin-based EXOR made its own proposal, May 12, to acquire PartnerRe for $137.50 cash per share, or about $6.8 billion. All figures are in United States dollars.
PartnerRe’s board rejected an earlier proposal – announced April 14 – from EXOR to acquire PartnerRe for $130 a share. EXOR, which is controlled by the Agnelli family, already owns nearly 10% of PartnerRe. Other EXOR holdings include 44% of voting shares of Fiat-Chrysler Automobile.
PartnerRe suggested in a May 4 release that $130 per share was EXOR’s “best and only offer” but a week later, EXOR increased its offer by $7.50 a share.
PartnerRe stated Wednesday its board was “prepared to engage in discussions” with EXOR to determine whether EXOR’s $137.50-per-share acquisition offer “can be improved so that it is compelling, on price and terms, to PartnerRe’s shareholders.”
Then on Thursday, EXOR stated it was “prepared to commence” discussions once PartnerRe’s board “declares that EXOR’s binding offer is reasonably likely to be a ‘Superior Proposal.'”
But PartnerRe stated Friday its board “continues to support” a merger with Axis.
For its part, EXOR stated it “is confident that PartnerRe shareholders will vote in their best interest and that EXOR’s $137.50 per share all-cash Binding Offer will ultimately prevail as it provides superior value and certainty.”
EXOR had suggested Thursday that if PartnerRe’s board does not declare EXOR’s offer to be superior to the Axis merger proposal, then EXOR is asking PartnerRe’s board to announce a date for a meeting to allow PartnerRe shareholders “to decide what is in their best interest.”
PartnerRe writes reinsurance and primary commercial insurance, including property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy, marine, specialty property, specialty casualty and multiline, among others.
Axis provides liability and cyber coverage in Canada, plus reinsurance. In commercial lines worldwide, Axis Capital’s offerings include marine, terrorism, aviation, political risk, professional lines and liability, among others.
A merger with Axis “would allow us to be invested in the primary insurance business for no premium and to be a consolidator in the reinsurance market,” PartnerRe’s board stated May 20 in a letter to shareholders. “This important continuity of interests allows our shareholders to benefit from substantial financial and operational synergies and significant immediate and future value creation.”
A merger with Partner would create a firm that is both “a top-five global reinsurer” and has a $2.5 billion specialty underwriting business, Axis Capital CEO Albert A. Benchimol stated in a release Jan. 25.
In 2014, A.M. Best Company Inc. reported that the year before, PartnerRe and Axis had $4.59 billion and $2.138 billion gross written premiums respectively in non-life reinsurance in 2013, for a combined total of $6.728 billion. PartnerRe and Axis Capital were ranked 10th and 15 respectively. The fifth biggest non-life reinsurer in 2013 was SCOR SE, with $6.675 billion in non-life reinsurance GWP. The top four were Munich Re, Swiss Re and Hannover Re and the Lloyd’s market.
EXOR stated May 21 its offer to acquire PartnerRe “delivers a premium of 10% to the implied per share value under the AXIS agreement of $125.17 using the closing price of AXIS shares as of May 5.”
If PartnerRe were to merge with Axis, PartnerRe shareholders would own 51.6% of the merged firm and Axis Capital shareholders would own the other 48.4%. PartnerRe shareholders would also receive a one-time dividend of $11.50 a share.
A merger with Axis “remains on track to close in the third quarter of 2015, subject to approvals by the shareholders of both companies, regulatory clearances and customary closing conditions,” PartnerRe stated May 20.
In addition to its stake in Fiat-Chrysler, EXOR’s other major holdings include a significant minority of powertrain and heavy equipment maker CNH Industrial N.V and the majority of real estate company Cushman & Wakefield, which EXOR agreed in May to sell
EXOR said May 12 it is filing preliminary proxy materials with the U.S. Securities and Exchange Commission “in connection with” a special meeting in July of PartnerRe shareholders.