AXIS refrains from citing proxy firm inconsistency in second report

AXIS Capital has again highlighted the fact that a proxy advisory firm is in favour of its proposed merger with reinsurance firm PartnerRe, but this time it hasn’t gone so far as to accuse Glass Lewis of inconsistency.

Last week insurance and reinsurance firm AXIS Capital highlighted that proxy advisory firm Institutional Shareholder Services Inc (ISS) had been inconsistent, by recommending that PartnerRe’s shareholders vote against the proposed merger (and for the EXOR offer), while recommending that AXIS’ shareholders voted for it.

As we explained at the time, proxy firms look at both sides from the shareholders points of view and make a recommendation based on which way they feel the shareholders should vote. Hence, it’s perfectly reasonable to recommend one set of shareholders to vote for and the other against, based on the facts surrounding each company.

Glass Lewis has gone with the same recommendations this week, it transpires, recommending that PartnerRe’s shareholders vote against the merger as it feels the EXOR offer provides more value, but at the same time recommending that AXIS’ shareholders vote for it.

The reason the proxy firms have come out in favour of AXIS’ shareholders voting for the merger is likely that the PartnerRe deal is the best offer on the table for AXIS. It’s perhaps a strong reflection of the fact that if EXOR succeeds in buying PartnerRe, AXIS becomes a very strong candidate for another offer or merger deal.

Both ISS and Glass Lewis clearly recognise that there is value to be generated for AXIS’ shareholders if the company merges with another firm, in this case PartnerRe. However for PartnerRe, the value is not great enough to overshadow the EXOR offer in the proxy advisories opinions.

AXIS Capital CEO Albert Benchimol commented today; “We are very pleased that Glass Lewis has joined ISS in recognizing the strategic rationale of the merger of equals agreement with PartnerRe for our shareholders.”

Adding; “The amalgamation agreement—which was unanimously approved by the Boards of Directors of both companies—offers significant strategic, operational, and financial merits, and the substantial value created for the two companies’ shareholders will only be accentuated by the operating synergies and superior capital generation that can be realized through the combination of the two companies.”

AXIS quotes the Glass Lewis report as saying:

“[T]he proposed merger with PartnerRe is consistent with Axis’ strategic objectives and would result in the realization of a number of strategic and financial benefits on a meaningfully quicker timeline than Axis could likely achieve otherwise.”

“We recognize that the combined company would be better positioned to face the challenging environment confronting reinsurers and insurers through the addition of scale, further diversification and operational efficiencies. Therefore, we believe the merger stands to create a larger, more stable and diverse insurance/reinsurance company than either company could likely become in the near term otherwise.”

“[T]he merger consideration…continues to represent a reasonable and fair price for Axis to pay given the expected strategic and financial benefits and the opportunity to enhance shareholder value. Thus, we believe the transaction represents an appropriate use of the Company’s equity capital. Based on these factors, along with the support of the board, we believe the proposed merger is in the best interests of shareholders.”

These proxy firms, ISS and Glass Lewis, have now both recognised that the merger would create value for AXIS right now based on its situation, but for PartnerRe the value of the amalgamation with AXIS is questionable, compared to the EXOR deal. Both had also questioned the conduct of the PartnerRe board throughout the process.

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

– Glass Lewis tells PartnerRe shareholders vote against AXIS deal.

– AXIS Capital questions ISS opinion on PartnerRe merger.

– ISS tells PartnerRe shareholders not to vote for AXIS merger, plus EXOR’s response.

– PartnerRe & AXIS continue to highlight tax risk of EXOR deal.

– AXIS: PartnerRe deal superior “immediately & in future” to EXOR deal, halts integration work.

– PartnerRe Board says EXOR’s offer likely superior, but still prefers AXIS.

– EXOR adds another $3 per common share to PartnerRe offer

– Enhanced PartnerRe – AXIS terms weaken merger rationale: Analyst.

– PartnerRe and AXIS reveal improved merger terms.

– EXOR says PartnerRe & AXIS acknowledge transaction is inferior.

– PartnerRe and AXIS Capital evaluate improving merger deal.

– As EXOR pursues PartnerRe, AXIS could attract buyer: Macquarie.

– 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.