PartnerRe, AXIS say their exchange offer is superior to EXOR’s offer

By Angela McDaniels

Tacoma, Wash., July 22 – PartnerRe Ltd. and AXIS Capital Holdings Ltd. reaffirmed their commitment to their planned exchange offer for PartnerRe’s preferred shares, provided that the companies receive a private letter ruling from the Internal Revenue Service that the change in terms would not create a “listed transaction.”

The exchange offer is part of the planned merger between the two companies. Meanwhile, EXOR SpA is pursuing PartnerRe and has plans for its own exchange offer for the preferreds.

On July 20, EXOR said it rejects the idea of the “fast-pay stock” tax treatment by the IRS because the transaction will be “for a business purpose wholly unrelated to the U.S. tax abuse at which the fast-pay rules were aimed and there is no tax avoidance purpose on the part of the issuer of the preferred or the potentially benefited common shareholder, both of which are not U.S. persons in the case of the exchange offer proposed by EXOR.”

“Despite PartnerRe’s statements to the contrary, EXOR does not believe that the Internal Revenue Service will treat the preferred shares in the EXOR proposed exchange offer as part of a ‘listed transaction’ or ‘prohibited tax shelter’ involving ‘fast-pay stock,’” according to a press release by EXOR.

On July 22, PartnerRe and AXIS Capital said they continue to view EXOR’s proposal to the PartnerRe preferred shareholders as having the potential to subject preferred shareholders (and possibly common shareholders) to an annual reporting and penalty regime applicable to prohibited tax shelter transactions under U.S. income tax laws.

PartnerRe and AXIS Capital said their proposal for preferred shareholders is “superior and with less risk.” If they are successful in obtaining a private letter ruling from the IRS that an exchange offer would not result in this reporting requirement, the preferreds issued in their exchange offer will reflect a 100 basis point increase in the current dividend rate and, subject to certain exceptions, an extended redemption date of the later of Jan. 1, 2021 and the fifth anniversary of the issuance date.

The terms of the new preferreds would be otherwise identical to the applicable existing PartnerRe preferreds.

Shareholders will vote on the amalgamation agreement at a shareholder meetings on Aug. 7.

EXOR offer

EXOR said it has legally committed to offer to exchange PartnerRe’s existing series D, series E and series F preferreds for new preferreds with identical terms to the existing securities but with the following improvements:

• A 100-bps increase in the dividend rate;

• Call protection until Jan. 1, 2021; and

• EXOR will commit to limiting distributions to PartnerRe’s common shares to no more than 67% of earnings until Dec. 31, 2020. EXOR noted that last year PartnerRe distributed 90% of earnings to shareholders.

AXIS Capital provides specialty lines insurance and treaty reinsurance. PartnerRe is a reinsurance company. Both are based in Pembroke, Bermuda. EXOR is a Turin, Italy-based investment company controlled by the Agnelli family.

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