AXIS Says Termination Fee Would Soften Blow if PartnerRe Deal Collapses

May 21, 2015 by Dan Reichl and Sonali Basak

AXIS Capital Holdings Ltd. Chief Executive Officer Albert Benchimol, who’s working to complete a merger with PartnerRe Ltd., said his company can withstand a collapse of the deal and that a termination fee would soften the blow.

“We intend to work on making it happen,” Benchimol said in a letter to employees, issued Wednesday in a filing. “But if it doesn’t, we are still the same strong company we were before we announced the merger, and if PartnerRe sells to another party we expect to receive a $280 million breakup fee that would increase our book value by approximately 5 percent.”

PartnerRe said Wednesday that it would negotiate with Italy’s EXOR SpA, a hostile bidder seeking to upset the merger. AXIS and PartnerRe agreed in January to form the world’s fifth-largest property-and-casualty reinsurer in a deal that has since been sweetened to value PartnerRe at $126 a share, based on AXIS’ closing price of $52.33 on May 1.

EXOR’s $6.8 billion proposal, or $137.50 a share, was rejected by PartnerRe as “unacceptable.” Jean-Paul Montupet, chairman of Bermuda-based PartnerRe, said in a statement that his company is worth materially more. PartnerRe has a waiver from AXIS allowing for direct engagement with EXOR, according to the statement.

Under the AXIS agreement, PartnerRe shareholders would be entitled to about 51.5 percent of a combined company. The revised AXIS deal, made after EXOR began bidding, also provided for a special dividend of $11.50 a share to PartnerRe investors.

“Whatever happens, AXIS has a bright future,” Benchimol wrote. “We are a great company on our own, and were successfully pursuing our own standalone strategy when PartnerRe approached us with the proposed merger.”

–With assistance from Tommaso Ebhardt in Milan.

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