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XL proxy account to turn up heat on Axa’s Buberl

Pressure on Axa CEO Thomas Buberl is set to intensify after XL's proxy filing showed the French carrier had bid around $2bn more than the only other indicative offer the Bermudian received.

Axa's share price was hammered in the wake of the XL agreement, falling by as much as 16 percent in the three weeks after the 5 March deal announcement before regaining some of the lost ground in a strong European equities market.

The negative re-rating of the stock, which drove the price-to-book multiple from 0.96x to 0.81x, reflected investor surprise at a transformative transaction and a major pivot towards P&C given previous statements from management.

But it also reflected a widespread perception that Axa had overpaid for the asset, with a 1.5x multiple - or close to 2x book on a tangible basis. This represents a very rich price for a single-digit return on equity business with significant concentration in markets where pricing had shown only a muted response to heavy loss experience.

Observers had assumed that Axa's $57.60 a share offer reflected a bidding war with rival Allianz that pushed the Paris-headquartered insurer to the $15.3bn takeout price.

However, the proxy statement suggests Allianz's interest was more casual than assumed, with unnamed "Party 1" having only made a "preliminary and non-binding oral indication of interest to acquire XL for a cash amount in the area of $50.00 per share" on 20 February.

A $50 per share offer would have valued XL at only $12.9bn, based upon the share count of 258 million.

Axa's eventual bid was 15.2 percent higher than the Party 1 proposal.

An offer in this region would have represented around a 35 percent premium to XL's undisturbed share price ahead of an article from Bloomberg that suggested takeover interest from Allianz. Axa's offer was equivalent to a 55 percent premium to the closing share price on 6 February, a day before the Bloomberg article.

XL indicated to Party 1 that the board would be unlikely to enter into a transaction at a deal price in the low $50s, and the bidder at that point asked only to be given a chance to take a "last look" at XL in the event of a higher bid from a third-party.

McGavick told Buberl on the day of the $50 per share oral indication that it had received the indicative offer and "that in order to proceed further Axa would need to make a competitive oral offer in light of the range of offers that could be received from other parties".

The next day Buberl mooted a proposal worth $57.60 per share, and this was formalised on 23 February. The proxy statement specifies no previous Axa indication on a valuation. Party 1 immediately bowed out following the Axa offer.

XL does not seem to have received any other bids and, although Allianz made its initial approach in the first half of last year, the proxy points to significantly more engagement between XL and Axa than between XL and Allianz by mid-February.

Proxy statements notoriously do not always tell the full story, but the Securities and Exchange Commission filing suggests that XL would not have been able to secure a rival bid even close to what Axa chose to offer.

It also makes clear that Buberl's $57.60 offer was not part of a steady escalation as XL held out for more, but a single knockout bid.


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