Following on the heels of EXOR’s announcement yesterday that it was “expanding its legally binding guarantee for the transaction”, reinsurance firm PartnerRe responded saying that the modifications to its offer fail to address the risks.
PartnerRe said that, despite the expanded guarantee of completing the acquisition, it “continues to believe that EXOR’s offer poses significant and unacceptable risks, while also substantially undervaluing the Company.”
PartnerRe says that the modification of the offer to try to make the guarantee of completion more legally binding, shows that EXOR acknowledges that there are risks and weakness in the all-cash offer for PartnerRe shares.
As a result the reinsurance firm continues to press its shareholders to vote in favour of the combination deal with insurance and reinsurance specialist AXIS Capital.
PartnerRe goes on to explain the following about the modified EXOR offer terms:
- EXOR Acknowledges Risks and Weaknesses in its Offer. The only material modification by EXOR to its proposed contract is that EXOR S.p.A. will now assume responsibility should one of its shell subsidiaries breach the contract. PartnerRe had identified this as a significant risk from the onset. EXOR’s effort to address this risk – after four intervening revisions to the merger agreement terms since April 2015 – is confirmation that EXOR has clearly been attempting to mislead PartnerRe shareholders while limiting its own liability.
- Regulatory “Walkaway” Risk Remains. Neither EXOR nor the Agnelli Family is obligated under the contract to file and obtain regulatory approval in any jurisdiction. Should EXOR and its controlling family members elect to not appropriately pursue regulatory approvals, EXOR’s shell subsidiaries have NO legal ability to force EXOR and its controlling family members to file for regulatory approval – hence the parent “guarantee” is insufficient. Importantly, PartnerRe believes that regulators will initiate detailed reviews of EXOR’s plans and strategies for PartnerRe in light of EXOR’s portfolio of capital intensive, low-margin companies and that EXOR would be highly levered following an acquisition of PartnerRe.
- EXOR’s Lenders have “Veto” Rights over Regulatory Process. EXOR’s lenders continue to have approval rights over concessions made to regulators in connection with securing regulatory approvals. This means that EXOR does not have unrestricted ability to commit to do everything necessary to obtain regulatory approvals.
- Revised Contract Does Not Protect PartnerRe Shareholders. PartnerRe notes that EXOR has not introduced a customary reverse termination fee, which is necessary for a financial buyer that is unknown to the relevant regulators. PartnerRe does not believe that EXOR’s current share ownership and verbal commitments are sufficient to ensure a path to completion. PartnerRe’s Board also believes that this normal protection has taken on even greater importance given recent global financial developments.
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