PartnerRe suitors divide analysts

In April, Italian investment firm Exor placed a bid for Bermuda-based PartnerRe, potentially thwarting Axis Capital’s takeover plans. Now, analysts are divided on which suitor will be successful.

Keefe, Bruyette & Woods (KBW) has backed Axis Capital in the fight, although after meeting Exor’s management team it believes this will be a narrow win. The analysts previously met with Axis’ and PartnerRe’s boards of management.

“Our key takeaway from our meeting with Exor’s representatives was an improved understanding of the choices facing PartnerRe’s preferred shareholders, and Standard & Poor’s clarifying comments about its rating processes make it a closer call than we’d previously thought,” said KBW.

“Still, at Axis’ current valuation (which we think is much more relevant than pre-announcement levels), its offer represents only about a -2.4 percent discount to Exor’s cash offer, and we think that the potential upside to shareholders more than reasonably balances the risks. We still think PartnerRe’s investors should vote for the AXS transaction, and while the picture isn't terribly clear, that’s still how we think it will play out.”

However, Macquarie Research has chosen to back Exor. Following a meeting with Exor’s management, which surrounded “several clarifications on the process and the deal metrics”, Maccquarie explained that it felt “Exor has a better chance at winning the process than initially anticipated”.

During the meeting, Exor clarified that the preferred shares of PartnerRe would be treated identically as they are under a standalone PRE model. Standard & Poor’s (S&P) affirmed that Exor’s rating and the ratings of its investee companies are independent of one another.

“Our prior discussion with preferred investors reveals meaningful confusion on this and a fear over a negative ratings change,” said Macquarie.