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Proxy firms advise PartnerRe shareholders to accept Exor offer

Proxy firms advise PartnerRe shareholders to accept Exor offer

Two leading proxy advisory firms have recommended that PartnerRe Ltd. accept a cash buyout rather than approve a merger with Axis Capital Holdings Ltd. — but they also told Axis shareholders to vote for the merger.

Both Glass Lewis & Co. L.L.C., New York, and Institutional Shareholders Services Inc., Rockville, Maryland, recommended that shareholders of Pembroke, Bermuda-based reinsurer PartnerRe accept an all-cash offer from Italian investment firm Exor S.p.A. and reject a proposed merger with Axis Capital Holdings Ltd., also of Pembroke.

Axis shareholders, meanwhile, were told by the proxy firms that they should vote for the merger with PartnerRe.

Exor and Axis have been locked in a three-way battle for control of PartnerRe. In January, Axis proposed an $11 billion merger to create the world's purported fifth-largest reinsurer. In April, Exor entered the fray with an all-cash, $130/share bid. Exor has since raised its offer to $140.50/share, while Axis and PartnerRe agreed to enhanced merger terms, including a preclosing dividend of $17.50/share

“In our view, based upon a detailed review of the various strategic, financial and valuation aspects, as well as the reasonably expected timing, certainty and risks of the respective proposals, on balance we believe that Exor's offer is superior to the currently proposed merger for both common and preferred shareholders of PartnerRe,” Glass Lewis said Friday in its analysis' conclusion. “Therefore, given the existence of what we believe to be a superior offer from Exor for both common and preferred shareholders of PartnerRe, we believe shareholders should oppose the proposed merger with Axis at this time.”

ISS leaned the same way.

“The true economic value of the Axis merger consideration is at this point unknowable, both because of assumptions about how the business challenges would play out and uncertainties about how much Axis shares are inflated by investor speculation about events other than the consummation of this merger,” ISS said Thursday in its analysis. “The Exor offer, by contrast, represents an unassailable and healthy 23.1% premium to (PartnerRe's) unaffected price on Jan. 23, and even a 2.5% percent premium to implied 'value' of the Axis merger consideration, even before accounting for any speculation in Axis shares.”

“With two weeks remaining before the shareholder vote on this Axis transaction, however, the certainty and premium which the extant Exor bid offers makes it the better alternative for PartnerRe shareholders,” ISS said.

Analysts suggested the tide may have been swayed.

“At this stage it would be difficult for (PartnerRe) and (Axis) to salvage the amalgamation process,” said Amit Kumar, New York-based vice president and senior analyst of insurance at Macquarie Group Ltd., in a research note.

“We expect this opinion to carry significant weight with institutional shareholders and, absent an improved offer from Axis, which we see as unlikely, we think Exor's odds of winning (PartnerRe) have improved significantly,” analysts at Keefe, Bruyette & Woods said of the ISS recommendation.

Axis, meanwhile, in a Tuesday statement, trumpeted the fact that the proxy advisors had recommended to Axis shareholders that they vote for the merger.

“The proposed merger with PartnerRe is consistent with Axis' strategic objectives and would result in the realization of a number of strategic and financial benefits on a meaningfully quicker timeline than Axis could likely achieve otherwise,” said Glass Lewis.

“We are very pleased that Glass Lewis has joined ISS in recognizing the strategic rationale of the merger-of-equals agreement with PartnerRe for our shareholders,” Axis Capital CEO Albert Benchimol said in the statement.

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