It seems assured that AXIS Capital will have to increase its bid for reinsurer PartnerRe, if it is to stay in the running for the reinsurance firm, after the a major shareholder told Reuters that it prefers the bid from EXOR.
Peter Langerman, Chief Executive of investment group Franklin Mutual Advisers LLC (FMA) who are currently the second biggest shareholder in reinsurance firm PartnerRe, told Reuters that the $6.4 billion all cash offer from EXOR was “much superior” to the AXIS transaction.
Langerman also told Reuters that the investor wasn’t “happy with the terms of (the Axis) deal” for PartnerRe, adding that Franklin Mutual Advisers LLC had “expressed that to the company.”
It’s the latest sign that the AXIS merger deal had not met shareholders expectations of a valuation for PartnerRe, with the all cash offer from EXOR now looking like the front-runner to acquire the reinsurance firm.
For large shareholders like FMA, the chance to cash out with the bid from EXOR at a higher valuation may prove ultimately to be more attractive, than a lower valuation despite having some clear strategic benefits that a tie-up with AXIS Capital would have brought to PartnerRe.
With a merger a potentially lengthy and difficult process to undertake, shareholders may prefer the chance to simply take the offer and hand PartnerRe over to EXOR, where it is promised to be run as a pure reinsurance firm. EXOR said yesterday that it felt that there is potential in PartnerRe as a private concern, with the total return across the reinsurance cycle still attractive to the diversified investment holdings group.
It will be fascinating to see whether AXIS comes back with an enhanced offer, whether any other suitors step into the fray, or whether EXOR has done enough to seal the acquisition by making what some shareholders clearly see as a more attractive offer.