EXOR accuses PartnerRe board of “engineering” AXIS transaction

EXOR fired another shot in the three-way reinsurance M&A tussle with PartnerRe and AXIS Capital yesterday, accusing certain members of the PartnerRe Board of “engineering” the AXIS deal as they stand to benefit “personally and financially” from it.

The Italian investment holding company explained that it believes that reinsurance firm PartnerRe has presented its shareholders with an “inferior transaction.” EXOR went on to explain that the proposed AXIS deal has been “engineered by some members of the PartnerRe Board of Directors, specifically the Transaction Committee, who stand to benefit – personally and financially.”

It’s a strongly worded accusation and comes as part of EXOR’s bid to communicate directly with PartnerRe preferred shareholders, as it solicits them to vote against the AXIS deal on the 24th July.

With the preferred shareholders holding over 40% of the voting rights, EXOR’s bid to solicit them is understandable.

EXOR sent a letter to all shareholders yesterday as it seeks to explain the rationale behind its all-cash bid for PartnerRe shares, which it sees as superior to the AXIS amalgamation.

With a particular focus on the important preferred shareholders, EXOR said that if its offer was successful; “PartnerRe preferred shares will remain outstanding in exactly the same way as under the AXIS transaction, but in a stronger and safer company that better protects the preferred shareholders’ investment.”

“With no change to PartnerRe’s debt level, and a more conservative capital distribution policy than recent practice, PartnerRe is expected to maintain (and potentially enhance over time) the current BBB rating of its preferred securities,” EXOR continued.

EXOR targets the PartnerRe Board in its press release, saying:

Some Facts the PartnerRe Board Would Prefer You Didn’t Know

The PartnerRe Board’s recommendation to vote in favor of the inferior AXIS transaction is an attempt to protect the outcome of a flawed process, where three non-executive directors of PartnerRe (the “Transaction Committee”):

(i) Negotiated the AXIS takeover of PartnerRe at a discount to PartnerRe’s then trading value;

(ii) Excluded the then CEO of PartnerRe and the Company’s financial advisors from the decision to commence that negotiation or from the negotiation of key economic terms including value and exchange ratio;

(iii) Left PartnerRe shareholders in an extremely weak position by announcing the AXIS transaction along with the PartnerRe CEO’s resignation;

(iv) Named one member of the Transaction Committee as PartnerRe “interim CEO”, granting him a material personal economic incentive tied to the successful completion of the AXIS transaction; and

(v) Secured for themselves a continuing role in the AXIS/PartnerRe combined entity, including Chairmanship.

EXOR’s proposed transaction is clearly superior for Preferred Shareholders, ensuring a financially stronger and more stable company going forward. But the Transaction Committee continues to protect the inferior transaction they arranged using promises of large capital distributions to common shareholders to try to secure their votes, all to the detriment of your interests.

EXOR also explained that the AXIS transaction would result in a company with higher leverage, than the standalone reinsurance firm PartnerRe, and with almost double the debt. It also cited future capital return plans of the PartnerRe – AXIS combination as “to the detriment of the value of your preferred shares and the security of their BBB rating and future dividends,” adding that the return of capital plans are “financially unsound” and well in excess of other industry peers.

EXOR’s offer will have no impact on “the existing leverage, financial strength or capital structure of PartnerRe, resulting in no changes in the future dividend streams of your preferred securities and in a potential enhancement of their current value and BBB rating,” EXOR explained.

EXOR urged the preferred shareholders to vote against the AXIS Capital deal.

This war of words is likely to continue for the time being.

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

– 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.