AXIS Capital Holdings is prepared to continue on its path as a standalone insurance and reinsurance company, if the proposed merger with PartnerRe falls through, while the break-up fee will boost its book value, according to CEO Albert Benchimol.
In a letter sent to employees yesterday and filed with the SEC, Benchimol explained that AXIS continues to recommend the merger with PartnerRe, as also does the Board of PartnerRe, as it explained yesterday.
However EXOR, the Italian Agnelli family backed investment conglomerate is now able to engage with PartnerRe thanks to yesterday’s announcement that the reinsurer has secured a waiver from AXIS allowing it to negotiate. However PartnerRe’s board made it clear that the EXOR bid remains too small and that it prefers the AXIS combination as well.
“AXIS remains committed to its amalgamation with PartnerRe and will reiterate that publicly,” Benchimol wrote in the letter, as the deal is still “in both companies’ best interests as it combines two world class organizations to create a powerhouse within the industry.”
However, the letter from Benchimol also made it clear that AXIS is fully prepared for the possibility that PartnerRe is acquired by EXOR and Benchimol explained that the firm is prepared to go it alone should that happen.
Benchimol wrote; “Whatever happens, AXIS has a bright future. We are a great company on our own, and were successfully pursuing our own standalone strategy when PartnerRe approached us with the proposed merger. We agreed to the merger because it accelerated our strategy, and we intend to work on making it happen. But if it doesn’t, we are still the same strong company we were before we announced the merger.”
And the small matter of a $280m break up fee, that would be paid to AXIS in the event another deal foiled its merger plans with PartnerRe, is also important.
“If PartnerRe sells to another party we expect to receive a $280 million break-up fee that would increase our book value by approximately 5%,” Benchimol explained.
The rest of the letter discusses the distraction that is being felt due to the prolonged uncertainty, something which by now will be affecting employees and potentially also making renewal discussions a little more difficult for both AXIS and PartnerRe.
Benchimol said that AXIS will re-prioritise some of the integration work that had been ongoing, suggesting he now expects the EXOR bid to delay any successful merger attempt.
It has to be considered that if the deal breaks up and PartnerRe goes to EXOR, AXIS Capital may make a very attractive fit for another insurance and reinsurance group. The firm’s diverse business and good results should make it an attractive proposition for many others in the space that seek scale.
Right now the ball is back in EXOR’s court to either engage with the PartnerRe board to discuss enhancements to its offer, or perhaps to engage more directly with other PartnerRe shareholders with a view to perhaps pushing its current offer through. The shareholders may still hold the key to this deal.