PartnerRe board seeks support for Axis deal
PartnerRe chiefs yesterday said it would be “irresponsible” to ditch its merger deal with Axis Capital in favour of a takeover bid by an Italian investment company.
And the PartnerRe board said that a successful Exor bid would lead to “exposing PartnerRe shareholders to the loss of any transaction and $315 million out-of-pocket expenses”.
Exor launched a rival bid, raised to $6.8 billion, after the proposed Axis/PartnerRe merger was announced.
The statement from the PartnerRe board said: “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 stand-alone proposition.”
And they urged PartnerRe shareholders to vote by post or at the shareholders’ meeting scheduled for Friday, July 24 to back the merger deal over Exor.
Exor, controlled by the wealthy Agnelli family, which numbers large stakes in giant carmaker Fiat Chrysler alongside a major shareholding in top flight Italian football club Juventus.
The PartnerRe board added that there was also a risk that Exor could walk away if there were “negative developments” in the protracted period to closing the deal.
And the PartnerRe statement said: “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 statement added: “The amalgamation with Axis Capital results in an even stronger company with higher, more diversified earnings, lower volatility and enhanced business profile.
“Importantly, the merger of equals with Axis Capital has a clear path to closing with minimal risk to shareholders.”
Exor raised its original $6.4 billion bid for PartnerRe — equivalent to $130 a share — to $6.8 billion, or $137.50 a share, in May.
The cash deal went up against the all-share merger proposition and Exor said it intended to retain PartnerRe as a stand-alone company and keep existing management and staff.
The Axis PartnerRe deal would create the world’s fifth largest reinsurer and the two companies have said joining forces would save $200 million a year — with some of the savings from redundancies among the combined Bermuda-based staff of around 130.
And the two reinsurance firms — near-neighbours on Pitts Bay Road in Pembroke — would also probably require less office space.
After PartnerRe rejected Exor’s initial bid, it announced a sweetener for shareholders — an $11.50 per share special dividend for shareholders if the $11 billion merger was completed.
The “break fee” — payable if one of the companies walked away from the deal — was also increased from $250 million to $280 million.
But Exor hit back that the special dividend would eat into PartnerRe’s capital to the tune of $550 million and weaken its financial strength.
Exor has built up a 9.9 per cent shareholding in PartnerRe, the largest single shareholder in the reinsurer.
The firm’s proposal was backed by another large shareholder, Franklin Mutual Advisers, which held a 4.6 per cent share in PartnerRe at the end of last year.
Franklin Mutual Advisers chief executive Peter Langerman said the Exor bid was “much superior” to the January Axis-PartnerRe deal — and added his company had expressed concern over the merger when it was announced in January.