Bermuda-based reinsurer PartnerRe, after weeks of resistance, has decided to meet with EXOR to determine whether the Italian investment firm will sweeten its $6.8 billion bid for the company.
Even so, PartnerRe’s board is keeping expectations low.
PartnerRe rejected EXOR’s initial unsolicited offer and avoided further steps until now, in favor of its original merger plan with AXIS Capital Holdings. But then earlier this month, EXOR increased the stakes by boosting its offer to $137.50 per share and buying 9.32 percent of PartnerRe, becoming its biggest shareholder.
PartnerRe is downplaying expectations that its meeting with EXOR will produce anything viable. It obtained a waiver from AXIS allowing it to meet with EXOR at length.
“PartnerRe’s board will engage with EXOR in good faith to determine if EXOR can improve its offer and terms such that our board would be willing to recommend it to shareholders,” PartnerRe’s directors said in a letter to shareholders explaining its action.
Still, the shareholder letter noted that the “EXOR transaction entails a significantly longer time frame to closing than the AXIS transaction, which exposes PartnerRe’s shareholders to heightened execution risk.”
PartnerRe added that without certainty that the deal will complete, full exposure to the oncoming hurricane season and other potential catastrophes could add more risk.
“EXOR’s offer also fails to compensate PartnerRe’s shareholders for the growth in the business between now and any reasonable closing date for a transaction with EXOR,” the letter states.
And then there’s this: PartnerRe’s directors said EXOR’s increased, $137.50 per share offer “significantly undervalues” PartnerRe, “both as a standalone entity and by comparison to the benefits inherent in the AXIS transaction.”
EXOR had said its increased bid was a final offer.
Not surprisingly, PartnerRe cautions in its announcement that the EXOR discussions may not produce anything viable. The company also expressed public displeasure at EXOR’s attempt to frame the PartnerRe/AXIS merger as an inferior option than its own bid.
“PartnerRe’s board of directors is open-minded and focused on creating value for our shareholders,” PartnerRe Chairman Jean-Paul Montupet said in prepared remarks. “Although we are disappointed that EXOR has made misleading statements regarding our prior discussions, we are interested in a proposal that may lead to superior value for our shareholders.”