31 July 2015 Insurance

Proxy Mosaic follows suit; recommends against PartnerRe deal

Proxy Mosaic has become the third proxy firm to recommend PartnerRe shareholders vote against the Axis transaction.

Italian investment company Exor recently offered $140.50 per share and has welcomed the announcement by the third proxy firm.

In its recommendation, the proxy firm explained that it believes the “superior” Exor offer “outweighs the potential upside in Axis’ economically inferior offer.”

Proxy Mosaic added: "Ultimately, preferred shareholders should ask themselves the following question:

“Would you rather hold a security within the capital structure of a disciplined holding company, or a security within an amalgamated reinsurance company that 1) has committed itself to extensive capital distribution plans for common shareholders that could put your dividend at-risk, and 2) is still captive to the kind of earnings volatility that is inherent in the insurance industry, even with the benefit of ‘scale’ and in a benign catastrophe environment?"

Previously, PartnerRe had argued that if it were to be acquired by Exor, its preferred shares would be at risk of a downgrade.

However, Proxy Mosaic have criticised this theory, stating that “there has been no real indication from the ratings agencies”. It added that “it’s conceivable that PartnerRe preferred shares could rise above their current BBB rating within the Exor capital structure” as Exor would adopt a more conservative capital distribution policy post-acquisition.

The proxy firm also criticised the PartnerRe/Axis merger, commenting that it suspects that “the upside to the merger has been exaggerated, with multiple expansion proving optimistic and the synergy realisation timeline too aggressive.”

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