A leading shareholder advisory firm has advised PartnerRe shareholders to vote against an $11 billion merger with rival Axis.

And Independent Shareholder Services (ISS) backed the rival $6.8 billion plus proposal from Italian investment firm Exor after it reviewed the merger transaction.

ISS said: “A vote against the proposed amalgamation with Axis is warranted in light of the availability of a superior and relatively certain all-cash offer from a competing bidder.”

And the review added: “The same uncertainty over market dynamics, overlaid with the post merger execution challenges the combined company will face, may well suggest that the competing Exor cash bid, which gives shareholders both immediately superior value and greater certainty of value, is a still more prudent alternative.”

Exor welcomed the ISS statement.

But Axis pointed out that ISS, in a separate analysis, had advised its shareholders to vote for the merger — and said the advice to PartnerRe shareholders was “inconsistent” with the reasoning behind ISS’ Axis report.

The ISS statement added that the performances of PartnerRe and Axis to date did not suggest that combining the two would boost its price and tangible book value by 30 per cent.

ISS said: “Axis stock price appears to have been affected by investors’ anticipation of events other than the consummation of this transaction — particularly the anticipation of receiving approximately $3 per share in termination fees and the prospect that Axis itself might be bought at a premium.

“As a consequence, any direct calculation of the market value of the consideration, if it relies on Axis share prices, is unreliable.”

But ISS said the Exor offers was an “unassailable and healthy” 23.1 per cent premium on PartnerRe’s unaffected price at the start of this year.

The news came after Exor upped its bid to ISS also predicted that Exor would have no problems with regulatory issues derailing their bid for PartnerRe because of the firm’s huge resources and previous ownership of an insurance business, as well as its major existing shareholding in PartnerRe and a lack of business overlap.

And the ISS review added that — unlike the PartnerRe/Axis proposal — a successful bid by Exor, controlled by the billionaire Agnelli family, would be unlikely to lead to staff layoffs.

ISS said: “Many of PartnerRe’s criticisms of Exor’s bid, moreover, are at best small beer ... For all it’s creativity, the board’s criticism of the Exor offer does not appear substantiated.”

And ISS added: “Still more disturbingly, the fact that it took a competing bidder to get the PartnerRe board to negotiate greater value for its own shareholders raises doubts about the efficacy of the entire negotiation process which led to the merger agreement with Axis in the first place.”

But Axis CEO Albert Benchimol said: “Axis Capital is a financially strong and strategically well positioned company with three strong and diversified businesses today including reinsurance, accident and health and specialty insurance.

“The amalgamation agreement provides PartnerRe with a low-risk entry into the primary insurance market and accelerates its accident and health initiative.

“For Axis Capital, the amalgamation expands our reinsurance business, enables a further acceleration of our growth initiatives and provides significant cost savings.”

Shareholders in both PartnerRe and Axis will vote on the merger on Friday, August 7.

ISS is a global company with more than 800 employees spread across 15 offices in 10 countries.

The firm covers around 39,000 companies in 115 countries, delivering proxy research and vote recommendations on nearly 28,000 companies each year.