PartnerRe Ltd. (NYSE:PRE) today issued the following letter to
shareholders on behalf of the Company’s Board of Directors:
May 20, 2015
Dear PartnerRe Shareholders:
As you have seen, we announced today that we are prepared to
engage with EXOR to determine whether EXOR’s offer can be improved
so that it is compelling, on price and terms, to our shareholders.
We appreciate the support of our shareholders, clients, partners
and employees and reiterate that we are sharply focused on value
creation.
However, at the same time, we believe it is important to set the
record straight on our process to date and our decisions regarding
the Amalgamation Agreement with AXIS Capital and our rejection of
EXOR’s initial proposal. We believe our interactions with EXOR to
date have been severely distorted and mischaracterized by EXOR.
THE PARTNERRE BOARD HAS CONSISTENTLY ACTED –
AND WILL CONTINUE TO ACT – IN THE BEST INTEREST OF OUR
SHAREHOLDERS
The Board’s Decision to Merge with
AXISFollowed a Thorough Exploration of
Strategic Options.
As part of our regular review of the Company’s ability to
execute on its strategic plan and long-term objectives, over the
past two years the Board has been intensely studying the critical
factors driving an evolving and increasingly challenging industry
environment, including continued industry consolidation and
extremely competitive pricing.
In this context, the Board actively considered various strategic
options and a range of potential transactions with companies in the
reinsurance and primary insurance markets. Other transformative
transactions, such as a sale, were also considered. The Board had
concluded that challenging market conditions and depressed
valuations made it imprudent to pursue a “sale” path that would not
appropriately reward PartnerRe shareholders for the value of its
unique franchise, brand and market position.
After evaluating a full range of alternatives, it became clear
that AXIS – a potential strategic partner with a roughly even split
of reinsurance and insurance businesses – was the most compelling
opportunity for our shareholders. It would allow us to be invested
in the primary insurance business for no premium and to be a consolidator in the reinsurance
market. This important continuity of interests allows our
shareholders to benefit from substantial financial and operational
synergies and significant immediate and future value creation.
PartnerRe’s Board Approached the EXOR
Proposal of $130.00 per ShareResponsibly to Assess Value and Risks
Between April 14, 2015 and April 17, 2015, members of the
PartnerRe Transaction Committee, representatives from outside legal
counsel and financial advisors, and certain senior executives of
PartnerRe had a series of detailed discussions on the EXOR Proposal
in order to make a recommendation to the PartnerRe Board.
PartnerRe also commenced preparation of a data room for EXOR
based upon the information made available to AXIS during its due
diligence prior to entering into the Amalgamation Agreement.
Upon initial review, it was clear to the PartnerRe Board that
the EXOR written proposal was notably lacking in several areas:
X No financing documentation was provided with the written
proposal X No information was provided regarding EXOR’s controlling
shareholder and its ownership of EXOR in order to evaluate the
insurance and antitrust regulatory filings required and the
feasibility of obtaining those approvals X No information was
provided on whether and how EXOR would protect PartnerRe and its
shareholders from a withdrawal of the EXOR Proposal during the
potentially protracted period from when PartnerRe would change its
recommendation and the termination of the amalgamation agreement.
However, PartnerRe’s Board was focused on constructively
addressing these concerns and in a meeting on April 18, 2015, the
PartnerRe Board, taking into consideration the advice of its
outside advisors, unanimously agreed with the PartnerRe Transaction
Committee’s recommendation to engage with EXOR to explore the
improvements EXOR might make on price, terms, timeline, certainty
and risks of the EXOR Proposal. To that end, PartnerRe requested –
and AXIS granted – a limited waiver allowing PartnerRe to engage
with EXOR.
EXOR Has Been Misleading PartnerRe
Shareholders as a Negotiating Tactic –Our Board will NOT Be Coerced into Relinquishing
Control for an Inadequate Premium
In contrast to EXOR’s assertions, the record of exchanges
between PartnerRe and EXOR clearly show that EXOR was unwilling to be flexible on price – a
price which significantly undervalues PartnerRe compared to the
benefits of the AXIS transaction and our value as a standalone
entity.
Here are the key facts:
April 19, 2015:
Jean-Paul Montupet, Chairman of the PartnerRe Board, emailed Mr.
John Elkann, Chairman and CEO of EXOR, noting that the proposed
price and non-price terms of the EXOR Proposal of $130.00 per share
were not a basis on which the PartnerRe Board would be willing to
proceed with EXOR. Mr. Montupet asked for an in-person meeting. In
a subsequent call, Mr. Elkann told Mr. Montupet that if the purpose
of the meeting was to negotiate EXOR’s price, there would be no use in having such meeting because
EXOR had no flexibility in relation to its price. After
further discussion, Mr. Elkann agreed to entertain the possibility
of a meeting subject to seeing a proposed agenda.
April 21 - April 23, 2015:
Advisors to EXOR and PartnerRe discussed specific areas of the
EXOR Proposal of $130.00 per share including financing, timeline
for due diligence, EXOR’s willingness to engage in the regulatory
approval process, plan for permanent capital financing and the
terms of EXOR’s proposed amalgamation agreement.
April 25, 2015:
Representatives of Paul Weiss, EXOR’s US legal counsel, notified
Davis Polk that EXOR would not be providing any further information
related to its financing arrangements or negotiate any terms
related thereto prior to the commencement of due diligence.
April 26, 2015:
Messrs. Montupet and Elkann had an in-person meeting to discuss
the price and non-price terms of the EXOR Proposal. Mr. Montupet
clearly conveyed that the offered price of $130.00 per share
undervalued PartnerRe and did not take into account the strength of
PartnerRe’s balance sheet and expected growth of tangible book
value per share between December 31, 2014 and the closing of a
potential transaction with EXOR. Further, Mr. Montupet elaborated
that the offered price did not include any control premium or value
for the PartnerRe franchise. Mr. Montupet also emphasized that the
transaction contemplated by EXOR, an all-cash change of control
transaction, was very different from a no-premium merger of equals
with AXIS because such a transaction would terminate the PartnerRe
shareholders’ ongoing equity interest, and if this upside
opportunity were to be removed, the cash price needed to be
increased to compensate the PartnerRe shareholders accordingly.
In response, Mr. Elkann repeatedly and
categorically stated that $130.00 per share was EXOR’s ‘best and
final’ price and that EXOR had no flexibility in this
regard.
In addition, Mr. Elkann specifically requested multiple times
that, if PartnerRe rejects the EXOR Proposal, it do so publicly on the basis of price alone and
without identifying the numerous execution
risks in the EXOR Proposal which had been identified by
PartnerRe and that EXOR had steadfastly refused to address. In a
good faith gesture, PartnerRe accommodated since our board
determined that EXOR’s offer of $130.00 per share was unacceptable
as a threshold matter.
In another follow-up conversation with Mr. Elkann to discuss the
EXOR proposal, Mr. Elkann again reaffirmed
that EXOR had no flexibility on the price of its proposal, and that
$130.00 was the best and final offer.
May 4, 2015:
AXIS and PartnerRe reaffirmed their commitment to the
amalgamation and announced certain terms changes. On the same day,
PartnerRe separately issued a press release announcing that the
PartnerRe Board had rejected the EXOR Proposal.
The PartnerRe Board was thorough and methodical in reaching its
conclusion that $130.00 per common share was inadequate and, based
on EXOR’s professed intransigence, was not going to be increased
even with the benefit of additional diligence.
EXOR’s Most Recent
Offer of $137.50 per Share Is Unacceptable on Value and
Terms
Notwithstanding their previous assertion that $130.00 per share
was their “best and final,” on May 12, 2015, EXOR increased its
offer to $137.50 per share. However, in addition to price
inadequacy, the offer has significant structural risks.
Price:
- EXOR’s offer of $137.50 per share
significantly undervalues the Company, both as a standalone entity
and by comparison to the benefits inherent in the AXIS transaction.
In particular, the EXOR offer does not adequately compensate
PartnerRe shareholders for the strength of its balance sheet,
robust earnings for Q1 2015, the expected growth of PartnerRe’s
tangible book value, any control premium or the value of
PartnerRe’s unique franchise.
Closing Risk:
- EXOR’s “irrevocable offer” continues to
be illusory as it would allow EXOR to abandon its offer without
consequence. Under EXOR’s offer, PartnerRe’s shareholders would
bear the risk of termination fees and expense reimbursement of up
to $315 million under the AXIS transaction if the transaction
failed to close. In particular:
- EXOR parent and its controlling
shareholders, who are the entities that must make various insurance
and antitrust regulatory filings, have no contractual obligation to
actually make the required filings or otherwise assist in obtaining
regulatory approvals. In addition, EXOR’s offer does not include a
regulatory termination fee to incentivize EXOR to obtain such
approvals and compensate PartnerRe shareholders, net of transaction
fees and expense reimbursement under the AXIS agreement, for risks
associated with a transaction with EXOR.
- EXOR’s parent guarantee only guarantees
the payment obligations of the EXOR subsidiary if a transaction
were to close. If the EXOR parties to the proposed merger agreement
breached any of their other obligations, PartnerRe would have
recourse only to EXOR subsidiaries, which based on limited publicly
available information, lack the resources required to be the
accountable party for a transaction of this size.
Timing Risk:
- The EXOR transaction entails a
significantly longer timeframe to closing than the AXIS
transaction, which exposes PartnerRe’s shareholders to heightened
execution risk. Without certainty regarding completion, full
exposure to the fast approaching hurricane season and other
potential catastrophes could provide additional 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.
Inappropriate Terms in the Context of a Cash
Transaction:
- EXOR’s offer is opportunistic in that
it seeks to apply the deal protection measures of PartnerRe’s
no-premium merger-of-equals with AXIS to a cash merger. These terms
are not appropriate in the context of an all-cash transaction. Were
we to consider a sale of the Company, we believe it is important to
make all attractive options available to our shareholders.
Put simply, quite apart from the issue regarding sufficiency of
EXOR’s proposed price, EXOR’s offer entails significant optionality
that would allow EXOR to walk away from a transaction without
consequence, requires PartnerRe’s shareholders to bear the risk of
paying up to $315 million of termination fees and expense
reimbursement to AXIS and imposes incremental execution risk while
failing to adequately compensate our shareholders in return.
The Board is Fully Aligned with
Shareholders
Although we will not leave misleading public rhetoric
unchallenged, 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 our shareholders. Simply
stated, the PartnerRe Board has an obligation to do the right thing
for our shareholders and that is what we intend to continue to
do.
Respectfully,The Board of Directors of PartnerRe Ltd.
_____________________________________________
About PartnerRe
PartnerRe Ltd. is a leading global reinsurer, providing
multi-line reinsurance to insurance companies. The Company, through
its wholly owned subsidiaries, also offers capital markets products
that include weather and credit protection to financial, industrial
and service companies. Risks reinsured include property, casualty,
motor, agriculture, aviation/space, catastrophe, credit/surety,
engineering, energy, marine, specialty property, specialty
casualty, multi-line and other lines in its Non-life operations,
mortality, longevity and accident and health in its Life and Health
operations, and alternative risk products. For the year ended
December 31, 2014, total revenues were $6.5 billion. At
March 31, 2015, total assets were $22.5 billion, total capital
was $8.0 billion and total shareholders’ equity attributable to
PartnerRe was $7.2 billion.
PartnerRe on the Internet: www.partnerre.com
Important Information For Investors And Shareholders
This communication does not constitute an offer to buy or sell
or the solicitation of an offer to buy or sell any securities or a
solicitation of any vote or approval. This communication relates to
a proposed business combination between PartnerRe Ltd.
(“PartnerRe”) and AXIS Capital Holdings Limited
(“AXIS”). In connection with this proposed business
combination, PartnerRe and/or AXIS may file one or more proxy
statements, registration statements, proxy statement/prospectus or
other documents with the Securities and Exchange Commission (the
“SEC”). This communication is not a substitute for any proxy
statement, registration statement, proxy statement/prospectus or
other document PartnerRe and/or AXIS may file with the SEC in
connection with the proposed transaction. INVESTORS AND SECURITY
HOLDERS OF PARTNERRE AND AXIS ARE URGED TO READ THE PROXY
STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS
AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN
THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Any definitive proxy statement(s)
(if and when available) will be mailed to stockholders of PartnerRe
and/or AXIS, as applicable. Investors and security holders will be
able to obtain free copies of these documents (if and when
available) and other documents filed with the SEC by PartnerRe
and/or AXIS through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by
PartnerRe will be available free of charge on PartnerRe’s internet
website at http://www.partnerre.com or by contacting PartnerRe’s
Investor Relations Director by email at robin.sidders@partnerre.com
or by phone at 1-441-294-5216. Copies of the documents filed with
the SEC by AXIS will be available free of charge on AXIS’ internet
website at http://www.axiscapital.com or by contacting AXIS’
Investor Relations Contact by email at
linda.ventresca@axiscapital.com or by phone at 1-441-405-2727.
Participants in Solicitation
PartnerRe, AXIS, their respective directors and certain of their
respective executive officers may be considered participants in the
solicitation of proxies in connection with the proposed
transaction. Information about the directors and executive
officers of PartnerRe is set forth in its Annual Report on Form
10-K for the year ended December 31, 2014, which was filed
with the SEC on February 26, 2015, its proxy statement for its
2014 annual meeting of stockholders, which was filed with the SEC
on April 1, 2014, its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2015, which was filed with the SEC on
May 4, 2015 and its Current Reports on Form 8-K, which were filed
with the SEC on March 27, 2014, May 16, 2014 and
January 29, 2015. Information about the directors and
executive officers of AXIS is set forth in its Annual Report on
Form 10-K for the year ended December 31, 2014, which was
filed with the SEC on February 23, 2015, its proxy statement
for its 2014 annual meeting of stockholders, which was filed with
the SEC on March 28, 2014, its Quarterly Report on Form 10-Q
for the quarter ended March 31, 2015, which was filed with the
SEC on May 4, 2015 and its Current Reports on Form 8-K, which were
filed with the SEC on March 11, 2015, January 29,
2015, August 7, 2014, June 26,
2014, March 27, 2014 and February 26, 2014.
These documents can be obtained free of charge from the sources
indicated above. Additional information regarding the
participants in the proxy solicitations and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available.
Forward Looking Statements
Certain statements in this communication regarding the proposed
transaction between PartnerRe and AXIS are “forward-looking”
statements. The words “anticipate,” “believe,” “ensure,” “expect,”
“if,” “intend,” “estimate,” “probable,” “project,” “forecasts,”
“predict,” “outlook,” “aim,” “will,” “could,” “should,” “would,”
“potential,” “may,” “might,” “anticipate,” “likely” “plan,”
“positioned,” “strategy,” and similar expressions, and the negative
thereof, are intended to identify forward-looking statements. These
forward-looking statements, which are subject to risks,
uncertainties and assumptions about PartnerRe and AXIS, may include
projections of their respective future financial performance, their
respective anticipated growth strategies and anticipated trends in
their respective businesses. These statements are only predictions
based on current expectations and projections about future events.
There are important factors that could cause actual results, level
of activity, performance or achievements to differ materially from
the results, level of activity, performance or achievements
expressed or implied by the forward-looking statements, including
the risk factors set forth in PartnerRe’s and AXIS’ most recent
reports on Form 10-K, Form 10-Q and other documents on file with
the SEC and the factors given below:
• the failure to obtain the approval of shareholders of
PartnerRe or AXIS in connection with the proposed transaction;
• the failure to consummate or delay in consummating the
proposed transaction for other reasons;
• the timing to consummate the proposed transaction;
• the risk that a condition to closing of the proposed
transaction may not be satisfied;
• the risk that a regulatory approval that may be required for
the proposed transaction is delayed, is not obtained, or is
obtained subject to conditions that are not anticipated;
• AXIS’ or PartnerRe’s ability to achieve the synergies and
value creation contemplated by the proposed transaction;
• the ability of either PartnerRe or AXIS to effectively
integrate their businesses; and
• the diversion of management time on transaction-related
issues.
PartnerRe’s forward-looking statements are based on assumptions
that PartnerRe believes to be reasonable but that may not prove to
be accurate. AXIS’ forward-looking statements are based on
assumptions that AXIS believes to be reasonable but that may not
prove to be accurate. Neither PartnerRe nor AXIS can guarantee
future results, level of activity, performance or achievements.
Moreover, neither PartnerRe nor AXIS assumes responsibility for the
accuracy and completeness of any of these forward-looking
statements. PartnerRe and AXIS assume no obligation to update or
revise any forward-looking statements as a result of new
information, future events or otherwise, except as may be required
by law. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date
hereof.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150520005759/en/
PartnerRe Ltd.Investors:Robin Sidders,
441-294-5216robin.sidders@partnerre.comorMedia:Celia Powell,
441-294-5210celia.powell@partnerre.comorSard Verbinnen & CoDrew
Brown/Robin Weinberg212-687-8080
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