June 2, 2015 by Canadian Underwriter
Shareholders of PartnerRe Ltd. and Axis Capital Holdings Ltd. – both of which write commercial insurance and reinsurance in Canada and elsewhere – will vote July 24 on a proposal to merge the firms.
PartnerRe announced Monday that both of the carriers have scheduled special meetings of their shareholders in Pembroke, Bermuda, where both firms are based.
If the merger is approved, it would create “a top-five global reinsurer” and a “$2.5 billion specialty insurance underwriting business,” Axis Capital CEO Albert A. Benchimol stated in a press release Jan. 25, when the firms initially announced their boards had approved the proposed merger. All figures are in United States dollars.
On May 26, PartnerRe announced it has “received antitrust clearance from the European Commission with respect to” the proposed merger.
“AXIS Capital and PartnerRe have now received all competition-related approvals required for the completion of their amalgamation agreement,” PartnerRe added.
Both Axis Capital and PartnerRe are traded on the New York Stock Exchange.
Turin, Italy-based EXOR S.p.A owns nearly 10% of PartnerRe shares and has offered to buy the firm for $137.50 a share.
A preliminary proxy statement – soliciting proxies from PartnerRe shareholders to vote against a merger with Axis – was filed earlier, by EXOR, with the United States Securities and Exchange Commission.
“EXOR 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 stated in a press release May 22.
“We are not asking you to vote on or approve the EXOR binding offer at this time,” EXOR stated in its preliminary proxy statement. “However, a vote ‘against’ the proposed Axis amalgamation will send a clear message to the PartnerRe board that it should give proper consideration to the EXOR binding offer, which remains open and available for acceptance.”
But PartnerRe argued in a June 1 release that EXOR’s offer “significantly undervalues” PartnerRe, adding that a merger with Axis Capital “makes strategic sense in an evolving industry environment characterized by continued consolidation and new forms of reinsurance and insurance capital which creates opportunities to better withstand cyclical volatility.”
EXOR’s holdings include about 44% of voting shares of Fiat-Chrysler Automobile and a significant minority in CNH Industrial N.V., a manufacturer of powertrains and Case and New Holland equipment.
PartnerRe’s reinsurance lines include property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy and marine. Its primary lines include aviation, energy, engineering and marine.
Axis Capital offers primary commercial insurance in Canada as well as reinsurance for property, casualty, professional liability and surety, among others. Axis Capital’s Lloyd’s syndicate is authorized to write insurance in or from Canada, with some exceptions, such as hail insurance in respect of crop in Quebec. Axis Syndicate 1686 offers property, terrorism, marine, energy, aviation, casualty and professional lines insurance.
PartnerRe stated June 1 that both firms “expect to begin mailing the joint proxy statement/prospectus to their respective shareholders in the coming days.”
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.
On May 20, PartnerRe stated in a release that its board of directors is “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.”
The following day, EXOR stated in a release it is “prepared to commence” discussions once PartnerRe’s board “declares that EXOR’s binding offer is reasonably likely to be a ‘Superior Proposal.'”
Then on May 22, PartnerRe stated in a release that “by demanding that we declare their offer ‘reasonably likely to be a superior proposal’ as a precondition to any negotiations, EXOR has effectively rejected” PartnerRe’s offer May 20 to engage in discussions.
EXOR had announced April 14 an offer to acquire Partner for $130 a share. PartnerRe shares had closed at less than $120 the day before. On May 11, EXOR increased its offer to $137.50 a share. PartnerRe shares closed June 1 at $131.84.
In 2013, PartnerRe and Axis had $4.59 billion and $2.138 billion gross written premiums respectively, in non-life reinsurance, A.M. Best Company Inc. reported in 2014. A.M. Best reported that SCOR SE was the fifth biggest non-life reinsurer in 2013, with $6.675 billion, compared to $6.728 billion for PartnerRe and Axis Capital put together. The top four, in 2013, were Munich Re, Swiss Re, Hannover Re and the Lloyd’s market. PartnerRe and Axis Capital ranked 10th and 15 respectively.