“Enhanced” Merger Terms For PartnerRe & AXIS

July 19, 2015

AXIS Capital Holdings Limited and PartnerRe Ltd announced enhanced merger terms that increase to $17.50 per common share the one-time, special cash dividend payable to each holder of record of PartnerRe common shares immediately prior to the closing of the amalgamation between PartnerRe and AXIS Capital.

A statement from the two Bermuda-based re/insurers said, “In addition, PartnerRe and AXIS Capital have agreed to match the terms contemplated by EXOR’s proposed exchange offer for PartnerRe preferred shares.

“However, after consultations with their advisors, PartnerRe and AXIS Capital believe that there is a material risk that EXOR’s proposed exchange offer for PartnerRe preferred shares could be viewed as a “listed transaction” under applicable IRS rules, which would subject preferred shareholders [and possibly common shareholders] to an onerous annual reporting and penalty regime applicable to prohibited tax shelter transactions under U.S. income tax laws, as described in further detail below.

“If PartnerRe and AXIS Capital are successful in obtaining a private letter ruling from the IRS that an exchange offer would not result in this reporting requirement, pursuant to the exchange offer PartnerRe preferred shareholders would receive newly issued preferred shares reflecting a 100 basis point increase in the current dividend rate and, subject to certain exceptions, an extended redemption date of the later of [a] the fifth anniversary of the date of issuance and [b] January 1, 2021. The terms of the newly issued preferred shares would be otherwise identical in all material respects to the applicable existing PartnerRe preferred shares.

“Further highlighting their commitment to the transaction, PartnerRe and AXIS Capital have also agreed that each party’s obligation to close the amalgamation is no longer conditioned on the absence of a three notch rating downgrade from A.M. Best. By removing this rating downgrade closing condition, PartnerRe and AXIS Capital have provided even more certainty to the successful consummation of the transaction.

“Having received all of the competition-related approvals and substantially all of the non-U.S. regulatory approvals, the amalgamation remains on track to close in the third quarter of 2015, subject to approvals by the shareholders of both companies, remaining regulatory clearances and customary closing conditions.

PartnerRe Chairman Jean-Paul Montupet stated, “We are very pleased to agree to enhanced terms with AXIS Capital so that shareholders can realize the value of the combination. This amalgamation will immediately enhance our strategic positioning and financial strength and we will have tremendous resources to build upon our proven track record of stability and success.

“As we approach the August 7th meeting date for shareholders to approve the amalgamation, we are confident that they will recognize the unique potential of this transformative combination. In addition to the cash special dividend, shareholders will benefit from owning a significant interest in a world-class specialty insurance and reinsurance franchise.”

AXIS Capital CEO Albert A. Benchimol stated, “The strategic and financial benefits of the merger agreement between AXIS Capital and PartnerRe are compelling, and we are confident that it will deliver superior value both to our shareholders and to our clients and distribution partners. The combination represents a unique opportunity to create a financial powerhouse in the industry with a strong franchise, robust earnings power, and double-digit ROE that is well-positioned to achieve superior and stable value creation across both secular and cyclical market changes.

“The combined company will have the scale, the product reach and the service capabilities to add substantial value and deepen our relationships with clients and distribution partners. At the end of the day, the merger creates opportunities that neither company could really achieve on its own in the near-term – including expense synergies in excess of $200 million, significant capital efficiencies, and incremental growth opportunities.”

“The Boards of Directors of both companies unanimously, after consultation with their outside legal counsel and financial advisors, approved the amendment giving effect to the enhanced amalgamation terms and determined that the terms of the amalgamation agreement, as amended, are advisable and fair to, and in the best interests of, PartnerRe and AXIS Capital, respectively,” the statement said.

“The amalgamation is accretive to operating earnings and ROE in year one, achieving double-digit EPS accretion and a double-digit ROE by 2017. A portion of the funds allocated to previously announced share repurchases will be used to fund the increase in the special dividend.

“The PartnerRe and AXIS Capital Boards of Directors continue to urge their holders of both common and preferred shares to promptly use their white proxy card to vote for the Amalgamation Agreement at the Shareholder Meetings on August 7, 2015.

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