The latest update from the EXOR – PartnerRe – AXIS will-they-or-won’t-they merger discussions is that Italian holding company EXOR said it would engage with the PartnerRe board and was willing to negotiate, but not on price.
In a letter to PartnerRe’s board today, Chief Executive John Elkann wrote that while the holding company is happy to get into negotiations with them, regarding its bid to acquire the reinsurance firm, it would not be shifting on the $137.50 per share offer it made.
Yesterday PartnerRe’s board said that it wanted EXOR to increase its bid and to look at the terms of completion of any deal. AXIS Capital’s board gave PartnerRe a waiver, allowing them to enter into negotiations with EXOR.
Meanwhile, AXIS Capital, the firm PartnerRe was preparing to merge with, said that it is prepared to go it alone if the deal to create a larger combined insurance and reinsurance firm falls through as a result of the EXOR bid.
EXOR now wants the PartnerRe board to acknowledge that its $137.50 per share offer is superior to the AXIS merger offer and then it will negotiate on terms it would appear, perhaps hoping to provide flexibility on the deal closure terms that had been raised as an issue for PartnerRe.
EXOR said in an announcement; “EXOR is prepared to commence these discussions once the Board of PartnerRe declares that EXOR’s binding offer is reasonably likely to be a “Superior Proposal,” which is the process called for under the PartnerRe agreement with AXIS Capital Holdings Limited.”
Perhaps, while not moving on the original per share all-cash offer, EXOR can find other ways to sweeten the deal by enhancing the terms for PartnerRe. Or perhaps, once forced to really compare the offers, the board of PartnerRe will be unable to deny that the cash-out now offer from EXOR may be at a superior value.
Elkann’s letter attempts to put the PartnerRe boards concerns over closing certainty and timing to bed, explaining EXOR’s position. But the main takeaway is that EXOR wants its bid considered seriously and is happy to engage if it is constructive.
Given EXOR’s Binding Offer of $137.50 per share is economically superior to the AXIS proposal, and the contract we submitted is more favorable to PartnerRe in material respects than your agreement with AXIS, we believe this should be a straightforward decision for the PartnerRe Board. This decision would allow EXOR and PartnerRe to engage constructively over the next few days, without placing any risk on your shareholders because your existing AXIS agreement will continue to remain effective.
Banking on growing book value significantly, through combining with AXIS, is not guaranteed in the current insurance and reinsurance market environment, something that sophisticated shareholders of the firms will be aware of.
The EXOR offer could still prove to be the best valuation that PartnerRe shareholders can hope to achieve over the next few years.
So the ball goes back to PartnerRe’s court it seems, for the moment. This game of reinsurance M&A tennis looks set to continue.
A copy of the letter can be found here.