AXIS Said to Value PartnerRe Deal by Viewing Montpelier, Catlin Acquisitions

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AXIS Capital Holdings Ltd., seeking to complete a merger with PartnerRe, is highlighting the prospects for growth of a combined company.

AXIS projects the post-merger market valuation will reach a level akin to those of other insurers targeted in recent deals, people with knowledge of the matter said. AXIS looked to valuations for companies including Montpelier Re Holdings Ltd. and Catlin Group Ltd. while making projections for the new entity.

The assumption is a key part of AXIS’ case that its proposal is superior to a rival bid for PartnerRe from EXOR SpA, said the people, who asked not to be identified because the process is confidential. Under such a scenario, PartnerRe shareholders would ultimately reap a bigger payout as shares rise at the new company, to become the world’s fifth-largest property-and-casualty reinsurer.

PartnerRe’s board last week stood by its agreement to combine with AXIS, rejecting the unsolicited $130-a-share offer from EXOR. After AXIS and PartnerRe amended their deal, Charles Sebaski, an analyst with BMO Capital Markets, estimated it’s still worth less to PartnerRe’s stockholders — about $119 a share — and predicted they’re likely to vote against an Axis transaction.

“We are less excited about the revised terms, but still believe the combined entity will be a stronger company than each company operating on its own,” Harry Fong, an analyst with MKM Partners, said in May 4 note on AXIS.

AXIS had a price-to-book value of 1.03 at the end of last week, while PartnerRe’s was 1, according to data compiled by Bloomberg.

Endurance Specialty Holdings Ltd.’s offer for Montpelier Re valued the target at 1.21 times its book value at the end of last year, Fong said in a March 31 note. XL Group plc’s initial December approach for Catlin Group Ltd. amounted to about 1.28 times book, Amit Kumar, an analyst with Macquarie Group Ltd., said in a note that month.

PartnerRe shares closed last week at $132.85 in New York. EXOR said that its offer is superior because it is all cash, and that the process that led to the AXIS agreement is “flawed.”