21 April 2015News

Axis may add sweetener to PartnerRe bid: KBW

Axis Capital is likely to add an extra sweetener in its bid for PartnerRe following a rival bid by Italian investment firm Exor.

Last week, PartnerRe was in the process of finalising the $11 billion merger with PartnerRe when Exor delivered a $6.4 billion rival bid. The deal represents a 16 percent premium to the value offered by Axis according to Exor.

The new offer is likely to prompt Axis to change the form of its own bid, in a way that will offer PartnerRe shareholders an extra sweetener, possibly in the form of some sort of special dividend, according to Meyer Shields, managing director at Keefe, Bruyette & Woods (KBW).

He believes that whichever suitor PartnerRe ends up with, its shareholders will benefit. However, the Exor offer, which values PartnerRe shares at $130 each, looks like a better deal for PartnerRe shareholders and would also allow the reinsurer to continue to operate as a standalone entity.

“It is a better deal for PartnerRe shareholders in terms of value. We anticipate that this may prompt Axis to make a better offer or maybe offer PartnerRe shareholders some sort of special dividend,” said Shields.

He said: “That is just speculation at this stage but we think there will be a response from Axis within a few weeks. We think Axis is getting a good deal and could probably afford to spend a little more.”

Shields added that he had expected another bid to emerge, but was surprised that it came from a company with no links to the industry.

“We thought other bids were likely for PartnerRe but we expected them to come from other reinsurers making them on a strategic basis rather than from an investment company unconnected with the industry. So it did come out of the blue in that sense,” he said.

“It seems Exor sees potential in the reinsurance industry on its own merit. PartnerRe certainly has the size to continue as a standalone player but with new ownership. This deal adds nothing to the company strategically, however, in the way the Axis deal does,” Shields added.

He explained that if the Exor-PartnerRe deal goes ahead, this would also leave Axis considering its own strategic options.

“If the does fall through for Axis we expect it to explore other alternatives. It could also become a target itself,” he said.