AXIS Capital, the insurance and reinsurance company seeking to merge with Bermudian reinsurer PartnerRe in the face of the bid from Italian investment firm EXOR, says the proposed merger is superior “immediately and in the future.” However AXIS has suspended all merger integration work.
After EXOR upped its offer with an additional $3 per share special dividend yesterday, both AXIS and PartnerRe have now stated they remain in favour of combining their firms, rather than seeing EXOR step into reinsurance with PartnerRe.
AXIS said; “The value of our merger agreement with PartnerRe is superior to the EXOR offer both immediately and in the future. We provide continuity of interest for investors to participate in the future upside resulting from the substantial strategic and financial benefits of the combined company, the exchange of PartnerRe common stock for combined company common stock in the amalgamation is tax free to PartnerRe shareholders, we offer deal closing certainty ahead of the upcoming renewal season, and the combined company will have a superior credit profile.”
In a letter to employees AXIS Capital CEO Albert Benchimol said that work on the merger had stopped, while PartnerRe negotiates with EXOR it’s assumed, but that the shareholder vote date remained set in stone.
Earlier today the Board of PartnerRe acknowledged for the first time that the deal with EXOR could be a superior offer, in transaction terms. But despite that acknowledgement, PartnerRe’s Board said that, while it would allow EXOR to negotiate and enter into due dilligence, it remained in favour of the merger with AXIS Capital.
PartnerRe’s Board of Directors said earlier that it “continues to believe that the transformative amalgamation with AXIS Capital is superior in value, terms and certainty of closing to the current EXOR proposal.”
Benchimol wrote to AXIS shareholders; “As a result of this latest news, we have decided to suspend all integration related work and activities. We will provide more updates when we have information that we can share. In the meantime, the shareholder vote with respect to the merger of PartnerRe and AXIS Capital remains set for August 7.”
So here we are, with an EXOR offer that the target admits may be superior, but both sides in the ongoing merger continue to believe is not the best route for either of the reinsurance firm’s.
And with integration work now on hold, it provides a real opportunity for EXOR to negotiate, but also demonstrates that the confidence in the merger getting completed has perhaps waned at AXIS and PartnerRe, with them unwilling to waste anymore time.
This far down the road to step away from the merger may not be in the best interests of AXIS, perhaps leaving it vulnerable to other offers and making it a target. Meanwhile PartnerRe’s Board is sticking to its guns and continuing to recommend the combination, over remaining a standalone reinsurance entity.
The future for the firm’s remains in the hands of their shareholders though, with voting set for early August. Analysts said today that they would recommend EXOR let’s the vote go ahead, suggesting they feel that shareholders are likely to have been swayed by its enhanced bid.
The statements today from PartnerRe and AXIS perhaps suggest that neither party is willing to further enhance their own deal, feeling that it offers enough value over the longer term. If investors have been swayed by EXOR’s increased offer, that could mean the next two weeks are a mere formality.
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