Japanese technology conglomerate, telecommunications and investments giant SoftBank Group is said to closing in on the acquisition of a roughly 25% stake in reinsurance firm Swiss Re, according to a report.
Bloomberg said that SoftBank founder Masayoshi Son is set to offer between 100 and 105 Swiss francs per share for the stake in the reinsurance giant, which would value Swiss Re at roughly 16% above the share price prior to these deal rumours first emerging.
Back in February the rumours began that SoftBank was looking to the insurance sector for a deal and had been in early talks with Swiss Re about taking a stake in the firm, rumours Swiss Re confirmed at the time.
Rating agencies said such a deal would be credit positive for the reinsurer, while analysts mooted rumours that the SoftBank investment could fund Swiss Re itself making an acquisition (which subsequently proved incorrect).
It then emerged that SoftBank would be seeking board seats at Swiss Re as part of any investment deal it made, which is no real surprise given the amount of money involved in taking a quarter stake in one of the world’s largest insurance and reinsurance specialists.
The overarching theme connected with the rumours though, is that such an investment could be transformative for Swiss Re, but the reinsurer would still not be drawn and said that there was no certainty that common ground between the pair would be found and a deal consummated.
Bloomberg said that people close to the deal reported it was progressing, with the rumoured price set to value Swiss Re at around US $39 billion.
The stake SoftBank is said to be closing in on is a roughly $9.6 billion holding in the reinsurer, at the upper end of the rumoured price range, a considerable chunk of the firm and an investment that would position the tech giant with significant sway at the firm.
Swiss Re’s CEO Christian Mumenthaler said recently that discussions were, “Very preliminary, with no certainty of outcome, therefore there’s not much I can say.”
But explained the potential deal as, “A collaboration, coupled with a minority investment,” that he and the Board of Swiss Re were, “Carefully assessing for the strategic impact.”
Mumenthaler also said that, “We’re not just going to do M&A for no reason, it has to add value,” but explained specifically on SoftBank that this type of major investor is looking at every major tech investment globally, noting, “Why wouldn’t we find that attractive.”
As yet there has been no response from either side on the matter this morning, but the fact the investment is still under discussion suggests progress has been made and common ground is being found.
The chances of this investment being made? We’d say relatively high under the current circumstances of a reinsurance market awash with merger activity and rumours.
Sealing a deal that could be transformative with a major backer may position Swiss Re ahead of the curve and also free it from needing to consider M&A options that might have been considered more predictable.
The freedom and security of having the SoftBank investment in the bag, being able to concentrate on business growth and making the most of synergies as a result, would be a great position to be in for Swiss Re, under current market conditions.