Axis questions ISS recommendation against PartnerRe merger

Bermuda-based Axis has questioned the validity of a recommendation by proxy firm Institutional Shareholder Services (ISS) to PartnerRe shareholders.

On July 24, 2015, ISS recommended PartnerRe shareholders vote against the merger of the Bermuda-based reinsurer with Axis, explaining that it is “warranted in light of the availability of a superior and relatively certain all-cash offer from a competing bidder”.

Rival bidder, Italian investment company Exor, recently offered $140.50 per share and has welcomed the recommendation by ISS.

On the amalgamation of PartnerRe and Axis, ISS explained that “there is nothing about the performance of either company to date which suggests that simply combining the two will drive a 30 percent increase in the price/tangible book value multiple the market will assign”.

The proxy firm also raised concerns about the PartnerRe board: “Still more disturbingly, the fact that it took a competing bidder to get the PartnerRe board to negotiate greater value for its own shareholders raises doubts about the efficacy of the entire negotiation process which led to the merger agreement with Axis in the first place.”

It also criticised PartnerRe’s criticisms of Exor’s bid as “small beer” and added that “for all of its creativity, the board's criticism of the EXOR offer does not appear substantiated”.

However, Axis has questioned the consistency of the proxy firm’s recommendations regarding the tie-up. ISS had previously recommended that Axis’ shareholders vote for the proposed amalgamation agreement with PartnerRe.

Axis said that it finds the separate ISS analysis for PartnerRe shareholders to be inconsistent with the reasoning put forward in its Axis report.

“On the one hand ISS recognises the strategic and financial benefits of the merger for Axis Capital shareholders in its conclusion, noting that it ‘will likely benefit from the increased scale of the merged entity’, but on the other hand ISS applies a different line of reasoning in its report for PartnerRe shareholders, failing to recognise the pro-forma financial profile of the combined company and the continuity of interest for PartnerRe shareholders,” said Axis.

Albert Benchimol, chief executive officer (CEO) of Axis, said: “We are pleased that ISS supports our board of directors’ strategic rationale for pursuing an amalgamation agreement with PartnerRe and that ISS recommends that Axis shareholders vote in favour of all management proposals at the August 7, 2015 special meeting of shareholders.”

“Axis is a financially strong and strategically well-positioned company with three strong and diversified businesses today—including reinsurance; accident and health; and specialty insurance.

“The amalgamation agreement provides PartnerRe with a low- risk entry into the primary insurance market and accelerates its accident and health initiative. For Axis, the amalgamation expands our reinsurance business, enables a further acceleration of our growth initiatives, and provides significant cost savings.”