As EXOR pursues PartnerRe, AXIS could attract buyer: Macquarie

Analysts at Macquarie believe that as Italian investment company EXOR continues to pursue PartnerRe with an enhanced offer, giving it a growing chance of winning the reinsurance firm in investors eyes, AXIS Capital becomes more vulnerable to another buyers offer.

The Macquarie Research team led by Amit Kumar said that following EXOR’s investor meeting held earlier this week and following the enhanced offer for PartnerRe, they have a “strengthened opinion” that PartnerRe shareholders will vote no to the merger with insurance and reinsurance firm AXIS.

Should that happen EXOR would be left open to negotiate freely with PartnerRe’s board and the board may be forced to hold another vote for shareholders to say yes or no to the EXOR all-cash offer for the firm.

At that point AXIS Capital could find itself left without a dance partner, in the M&A ball, which the analysts believed could result in an offer from such insurance and reinsurance firms as Arch Capital or even Everest Re.

The analysts explain; “Investors and other sell-siders continue to switch and put a lower probability on AXS-PRE deal making it past the finish line. This enables a potential buyer (such as ACGL) to exploit the situation and bid for AXS over the next few weeks.”

Arch Capital Group (ACGL) is already rumoured to have made an informal approach to AXIS in recent weeks, with an offer rumoured to be at $65 per AXIS share. However confusion was apparent following that rumour, about whether Arch really had made a fresh approach at that time, but now, if the EXOR deal continues to build momentum the time may be right for another attempt to acquire AXIS.

“An exploratory letter to AXS suggesting a $65/share offer for AXS, contingent on AXS terminating its merger with PRE would freeze the AXS-PRE process and delay the voting process as AXS evaluates this offer,” the Macquarie analysts continued.

That could result in PartnerRe shareholders and arbs, which includes many hedge funds now as a large proportion of PartnerRe shares have changed hands in recent weeks, buying AXIS shares to gain enough sway to vote down the AXIS-PartnerRe vote when it did happen.

That would leave AXIS at risk of losing the PartnerRe deal, but with any fresh offer from a new party the board could be forced to seriously consider it.

AXIS’ board is said to have turned down a number of approaches from Arch in the past and could seek to do so again, we’d imagine. If that happened AXIS could be left without a partner, with no deal on the table and having spent months planning for integration with PartnerRe, any break-up fees may not go far towards compensating the firm.

The uncertainty that AXIS could find itself facing could be detrimental to it over the longer run, perhaps demoralising staff and risking some departures if the board decided to go it alone after losing out on PartnerRe.

The risk of that happening may actually make AXIS more open to offers now, which could lead to more suitors coming to the fore. If AXIS was considered really vulnerable perhaps even more than one suitor.

Of course before any of that scenario happens, it remains to be seen whether EXOR can win over PartnerRe’s shareholders or whether AXIS and PartnerRe’s board have cooked up an improved amalgamation offer that can win them back to their side.

With the July 24th vote deadline approaching fast, there is not long left for the amalgamation deal to be sweetened for shareholders, so it’s expected that more developments will be seen in the coming week.

For the full story see our previous articles, most recent first:

– Activist Sandell says PartnerRe board misinforming shareholders.

– AXIS needs to match, or beat, EXOR’s improved PartnerRe offer.

– EXOR enhances deal terms for PartnerRe shareholders.

– PartnerRe unimpressed with EXOR’s expanded completion guarantee.

– EXOR sweetens PartnerRe offer with completion guarantee.

– EXOR says receiving positive response from PartnerRe shareholders, plus updates from both sides.

– PartnerRe cites inadequate price, unacceptable risk of EXOR offer.

– Confusion over whether Arch is bidding for AXIS, or not.

– KBW analysts still give AXIS the edge to win PartnerRe deal.

– Arch said to be considering AXIS Capital bid: Reports.

– Analysts feel EXOR has improved chance of buying PartnerRe.

– EXOR capital structure has no bearing on PartnerRe rating: S&P.

– EXOR accuses PartnerRe board of “engineering” AXIS transaction.

– PartnerRe Board urges Preferred Shareholders to vote for AXIS merger.

– Bermuda court rules against Exor’s shareholder detail request.

– PartnerRe shareholders should vote to go with AXIS: KBW analysts.

– PartnerRe says Exor’s lawsuit claims “without merit”.

– Exor sues to gain access to PartnerRe shareholder details.

– PartnerRe-AXIS : $60m fees from third-party reinsurance capital by 2017.

– EXOR welcomes PartnerRe shareholder vote, Sandell questions Board.

– PartnerRe rejects EXOR again, to proceed with vote on AXIS merger.

– EXOR says will engage with PartnerRe board, but not on price.

– AXIS prepared to go it alone if PartnerRe deal breaks up.

– PartnerRe board wants improved EXOR bid, or it’s back to AXIS.

– AXIS unlikely to sweeten PartnerRe offer to match EXOR: Reuters.

– Shareholders hold key to PartnerRe’s future, EXOR bid preferred.

– EXOR increases offer for PartnerRe, becomes largest shareholder.

– Exor to consider increasing bid for PartnerRe, reports.

– AXIS, PartnerRe committed on merger. EXOR commits to its offer.

– Major shareholder prefers EXOR’s bid for PartnerRe over AXIS’.

– EXOR bids $6.4B for PartnerRe, to get into reinsurance.