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BMO: AXIS unlikely to engage in bidding war with EXOR over PartnerRe

Written by Jasir Jawaid

BMO Capital Markets on April 16 downgraded PartnerRe Ltd. after the company received an offer from Italian investment company EXOR, whose all-cash proposal represented a 16% premium to the per-share price under PartnerRe's merger agreement with AXIS Capital Holdings Ltd.

Analyst Charles Sebaski noted that when he moved the stock to "outperform" in March, he cited the possibility of another bidder vying for the company. Now that this has happened, along with the fact that PartnerRe's stock got a lift on the news, he is lowering his investment opinion to "market perform."

But the analyst does not expect AXIS to engage in a bidding war with EXOR for a number of reasons, including dilution and what Sebaski called "desperation." If AXIS were to counterbid, it would have to dilute its shareholders by more than 10%. Also, chasing a deal that initially chased AXIS would make it look like it needs to do something, Sebaski said.

Sebaski thinks that in the absence of any action from AXIS, the PartnerRe board's opinion might tilt in EXOR's favor. He raised his price target to $130 per share from $122 per share as a result of the higher offer. His EPS estimates remain $9.05 for 2015 and $8.60 for 2016.

This article was published by S&P Global Market Intelligence on the S&P Capital IQ Pro platform.


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