The Financial Times has reported that Bermudian reinsurance firm Arch Capital Group is considering a $6.56 billion, $65 per share, bid for AXIS Capital, threatening to gate crash the M&A tussle that has been ongoing for the last few weeks.
AXIS Capital is in the midst of an attempt to amalgamate with another Bermudian reinsurance firm, PartnerRe, while Italian investment holding company EXOR wants to buy PartnerRe out right.
The Insurance Insider recently wrote that Arch had made a number of “friendly approaches” to buy AXIS in the last few years. The FT’s report suggests that these approaches are perhaps ongoing and recent.
“Arch has informally said it is willing to pay as much as $65 a share to buy Axis in a deal that would value its equity at $6.56bn,” the FT says citing people “familiar with the matter”.
These people also told the FT that Arch is working informally with an investment bank, but that “no formal offer is assured.”
It may simply be the case that Arch is considering its move if the AXIS – PartnerRe deal falls through, or PartnerRe is snapped up successfully by EXOR.
At a time when these companies are vulnerable and uncertainty reigns, another insurance or reinsurance company could swoop in and make an offer that changes the direction in this M&A struggle completely.
According to AXIS’ recent investor presentation it valued its common equity at $5.3 billion with a total capitalisation of $7 billion, at the 31st March. The AXIS share price currently sits at close at $56.8 with a market cap of $5.83 billion.
So any offer from Arch at $65 would be deemed attractive by shareholders, valuing AXIS at above its current equity valuation.
However, a combination of Arch and AXIS, which both have insurance and reinsurance divisions and perhaps more duplication of resource between them, could be a more difficult deal to execute, and to sell to shareholders, than the amalgamation with PartnerRe. But it’s undoubtable that the resulting re/insurer would be a compelling long-term prospect.
Any offer that comes from Arch at these valuations could be enough to scupper the deal with PartnerRe for AXIS, which perhaps could leave the door open for EXOR and finally settle at least one of these re/insurers’ future.
From earlier: Analysts feel EXOR has improved chance of buying PartnerRe.