Since the announcement of a definitive agreement of sale between PartnerRe and EXOR, I've had an opportunity to discuss with a number of smart people the rationale for retaining the "go shop" provision rather than negotiating it away for a modestly enhanced payment. As a PRE shareholder, I frankly would have preferred the later rather than the status quo. However, it is the general consensus that the PartnerRe board retained this clause in order to deflect further criticism of its poor corporate governance process surrounding the aborted amalgamation agreement. Moreover, I suspect that the Italians saw minimal value in removing this provision inasmuch as there has been ample time for a potential "white knight" to surface. Consequently, I foresee an extremely small probability that a new bidder for this property will surface. Stranger things have happened in this continuing drama, but I'm certainly not betting on it.
Most likely. However, there remains the "go shop" provision in the definitive agreement. Frankly, I was a little surprised that EXOR didn't negotiate away this provision for a modest additional consideration. Perhaps it feels that anyone who wanted PartnerRe would already have come forward. Still, PRE's board says it will aggressively shop the comoany during this interval. I view the probability of a new bid as quite low, but not zero. In any event, it is nice to see that the share price of Partner stock has significantly narrowed the gap to the $140.50 offer consideration. Moreover, PRE shareholders will also receive quarterly dividends amounting to $0.70@share until the deal closes, probably in March, 2016. Now I have to think about what to do with the proceeds of this transaction.
Increasingly I'm hearing from smart people I know that the August 7th special shareholders' meeting for PartnerRe will not occur. I'm also in the camp that believes that PRE's directors want to avoid the embarrassment of a "no" vote by common and preferred holders on the proposed amalgamation. Consequently, the PartnerRe board will have to hammer out an agreement with EXOR. I believe it will be optically quite difficult to agree to the current terms, so some improvement on them must be sought. The quid pro quo for such an enhancement would be a deal "in hand" rather than the reinsurer being shopped subsequent to the SGM. Consequently, I believe it will be an interesting several days leading up to August 7th. I bet there is a lot of activity in PartnerRe's offices in Bermuda.
Reuters has reported that the PartnerRe board has reached out to EXOR in order to begin negotiations on a purchase of the reinsurer. The same report indicated that EXOR wants PartnerRe to come up with a definite proposal before it sits down with company directors. How motivated are the parties to strike a deal prior to the SGM on August 7th? It is pretty much a foregone conclusion that PRE shareholders would vote down the proposed amalgamation. Does PartnerRe's management want to avoid this embarrassment? Does EXOR want a deal in hand to avoid a shopping interval for the reinsurer? Lots of questions still waiting to be answered. What appears quite likely is that AXIS shareholders would vote for the transaction in order to virtually guarantee the company will obtain a breakup fee. Query: Could PartnerRe's directors win re-election for their performance involving these transactions?
PartnerRe has gone radio silent since announcing it is willing to negotiate with EXOR. I just listened to the company's second-quarter investor call, and management refused to entertain any questions related to the proposed transaction and upcoming vote. Having received a negative decision from both ISS and Glass Lewis, one wonders if PartnerRe's board has changed its position and is willing to actively negotiate with EXOR. If the PRE shareholder vote goes against the board, there remains the ability to "shop" the company. One would think that it would be worth something to EXOR to get a done deal and avoid the uncertainty of such a marketing interval, Of course, the question is: How much is it worth and what form would the consideration be? The next two weeks should be interesting.
EXOR said that both companies' shareholders would have to vote down the transaction for the saved termination fee to be paid to PRE shareholders.
I understand why ISS and Glass Lewis had a split decision. It's in AXIS's shareholders' interest to approve the amalgamation in order to obtain the break-up fee. If both shareholders groups voted against the transaction, it would hurt the economic interests of AXIS. As a PRE shareholder, I hope both firms' shareholders vote "NO", but I think it unlikely.
There is more than a $4@share spread currently between Partner's stock price and the EXOR offer of &140.50@share. Now that ISS has dealt a heavy blow to the proposed amalgamation, the question is: Will this spread narrow in the two weeks leading to the announced share vote? Other folks I've spoken with, in fact, doubt that the special meeting will actually occur. They believe that a deal will be struck between PRE and EXOR in the interval. In any event, it should be an interesting next two weeks.
I just got a call from a proxy solicitation firm for PartnerRe. When I told the lady that I was supporting the EXOR bid she asserted that AXS/PRE had recently matched the former's offer. I informed her that I believed she was wrong and that the shareholder advisory firm ISS agreed with me and was recommending that PRE shareholders vote against the MOE. I also told the woman from the solicitation firm that I had lost confidence that the PartnerRe board was protecting my interests as a PRE shareholder. She told me she appreciated my position on the matter and would communicate it to PartnerRe's BODs. I hope she does, but I doubt it. It will be interesting to observe if AXS/PRE have one last trick up their sleeves to try to win the shareholder vote on August 7th. As a PartnerRe shareholder, I guess I should hope they do.
ISS, the largest shareholder advisory firm, has come out against the AXS/PRE MOE. Many folks believe this firm carries significant influence, especially with indexed funds, as to how they vote. It will be interesting to observe what reaction, if any, comes from AXIS, Partner, and EXOR.
Now that EXOR is able to engage in PartnerRe due diligence and negotiate with its board, will the firm further increase its offer for the reinsurer to secure the directors' agreement for its sale? PRE's board is still taking the official position of supporting the AXS/PRE amalgamation, as is AXIS's board. The $3.00@share increase in EXOR's bid got Partner to the negotiation table. What will it take to close the deal? Will it happen, especially prior to the August 7th shareholder vote? The drama continues.
Apparently Partner will not agree to the current EXOR bid and wants a further enhancement to these terms, whatever that may be. It's official position is that they continue to support the AXS/PRR MOE. Therefore, I suspect PRE will want to get something more out of EXOR before they capitulate. Consequently, the game isn't quite over, IMO.
Fdahope: I believe you are essentially correct. It appears that the PartnerRe board has effectively raised the WHITE FLAG. This whole escapade is an exercise in horrible corporate governance, IMHO. As a long-time PRE shareholder, I would never vote for these directors again. The irony is that once the EXOR transaction is completed you'll see the PartnerRe board taking bows for the deal that was struck.
PartnerRe's board this morning announced that EXOR's bid has a likelihood to be a superior offer and will both allow due diligence and engage in negotiations with EXOR. IMO, this is a tremendous turnaround by the directors of this reinsurers. However, the board is still arguing that shareholders should vote for the MOE. The plot thickens as the drama continues.
I haven't seen ISS et al. either. I think it is a low probability that AXS/PRE responds, but not impossible. Also, I wonder how Albert is dealing with his shareholders.
With EXOR having raised its bid, the ball is now in AXS/PRE's court as to whether it will raise its offer again in the battle to secure its MOE. I believe we're now in the realm of egos, not economics, so who knows. The plot thickens as the drama continues down to the August 7th shareholder vote.
EXOR raised its bid for Partner by $3.00@share through a proposed special dividend. Therefore, the value of its offer to common shareholders is now $140.50@share. The drama continues.
If I were an AXIS shareholder I might well feel as you do, unless one believes the MOE benefits will be so extraordinary. James, you'll recall that I said this process is now being motivated by the "egos" of AXS/PRE and not by the economics. I've seen such behavior in the past, and it is not so unusual. In any event, the question is: What will EXOR do? Frankly, I believe they are more rational than AXS/PRE, so any increase in their offer is 50/50 at best. It would be interesting if there is a revolt of the AXIS shareholders and now the AXS/PRE boards have to worry about the deal being voted down on their end. In which case, Partner could receive the break-up fee.
fdahope: you may very we'll be correct about the odds of an EXOR counterbid being les than 50-50. I do think, however, that they will have to up the ante modestly again to prevail. In any event, it should be good drama leading up to the August 7th shareholder vote.
Now that AXS/PRE have announced the latest enhancements to their amalgamation agreement, the ball is in EXOR's court as to how it will respond. I personally believe there is a 50-50 chance that it will up its offer for Partner. However, I expect that it will wait as long as possible to do so as to make it more difficult for AXS/PRE to respond. Moreover, it is interesting that there has been such a muted reaction to the share price of Partner in response to the latest announcement. IMO, this speaks to the level of cynicism among investors as to how favorable the MOE will be to the long-term enhancement of shareholder value. Anyway, it will be an interesting few weeks until the special shareholder vote on August 7th. The drama continues.
AXS/PRE just announced that they are increasing the special dividend to PartnerRe shareholders from $11.50@share to $17.50@share. This will obviously result in increased dilution to AXIS shareholders, but it's board must have thought it was worth the price to pay. This move will make things interesting as the battle between PRE and EXOR continues down to the wire, i.e., the special shareholders' meeting on August 7th.