Axis Highlights Breakup Fee as Exor Bid Threatens PartnerRe Deal

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 Bermuda-based Axis’s 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.”

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