Exor bid superior, says second advisory firm
A second investment advisory firm has backed a bid by Italian company Exor for Bermuda-based reinsurer PartnerRe.
Glass Lewis advised shareholders in PartnerRe to reject the rival merger proposal from Axis Capital as the all-cash Exor offer is superior.
Glass Lewis said: “For common shareholders ... the relative immediacy and certainty of all cash offer at a premium valuation, which we believe is in line with prior transactions involving reinsurers, makes Exor’s offer more attractive.
“For preferred shareholders Exor’s commitment to deliver the full economic value of the dividend rate increase at closing, in the absence of an IRS ruling, otherwise blessing the rate increase for the next five years, as well as its limitation on capital distributions, continue to meaningfully differentiate Exor’s exchange offer as compared to the ‘matching’ exchange offer under the Axis proposed merger.”
The Glass Lewis advice to PartnerRe shareholders came after Institutional Investor Services (ISS) last week advised PartnerRe shareholders to vote against the merger.
But, in a separate review, ISS advised Axis shareholders to back the merger. Axis said that the advice to PartnerRe shareholders was “inconsistent” with the reasoning behind ISS’ Axis report.
Glass Lewis added that the pledge by Exor, controlled by the billionaire Agnelli family, to maintain PartnerRe as a stand-alone company meant there was “a lack of execution and integration risks”.
The Glass Lewis report said: “We believe Exor has raised reasonable concerns with regards to the ability of PartnerRe/Axis to ultimately realise the benefits envisioned, especially to the extent advertised by the companies.
“We aren’t convinced that this theoretical value of the PartnerRe/Axis merger based on a number of direct and indirect assumptions, is truly attainable in the near term, given the inherent uncertainties discussed.”
It added that it did not believe that the Axis stock price “serves as a reliable indication of the merger consideration due to the impact that the takeover speculation may have had on Axis’ stock price” so Glass Lewis had used $131.17 as the implied purchase price for the $11 billion PartnerRe/Axis merger proposal.
Glass Lewis added: “Even with some similarity and familiarity between the two companies, difficulties often arise once it becomes time to combine two disparate entities with separate businesses, structures and philosophies, particularly when reducing staff and continuing to operate in a challenging and competitive environment.”
Shareholders in both PartnerRe and Axis, who are near-neighbours on Pitts Bay Road in Pembroke, will vote on the merger on Friday August 7.
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