According to the FT, the ongoing discussions between Japanese technology, telecommunications and investment giant SoftBank and its target investment reinsurance firm Swiss Re, include the former taking “multiple” board seats in the latter.
Just over ten days ago the news emerged that Swiss Re is in what were termed advanced talks to sell SoftBank as much as a $10 billion stake in the reinsurer, almost a third of its near $34 billion market capitalisation.
Swiss Re confirmed that it has been in “preliminary discussions with SoftBank Group Corp. regarding a potential minority investment in Swiss Re,” but said at the time that the talks are at a very early stage and that there is no guarantee that any investment will be agreed upon.
That has sparked the imagination of the re/insurance market and M&A bankers, as the deal offers numerous potential synergies and has been termed potentially transformative by many.
Now, the FT reported yesterday that the discussions between the two are ongoing, with a meeting between Swiss Re chairman Walter Kielholz and SoftBank founder and CEO Masayoshi Son said to be on the cards in the coming weeks.
One of the items said to be up for discussion is “multiple” board seats, as SoftBank seeks an element of control from such a major investment.
This is, of course, not surprising at all. A mooted $10 billion investment in a company from an industry outside of SoftBank’s areas of expertise would naturally see the investor looking to have some say in how its funds are used and the strategic direction of Swiss Re.
If the reinsurer is going to consummate such a relationship, it too would be advised to make as much use of the insight and synergies with SoftBank as possible, with board seats one way to embed the thinking of SoftBank and the access to its many businesses within itself.
The FT states that SoftBank wants board seats to “influence how the reinsurer manages its $161bn in investments.”
This is less certain, as while it will of course have some influence over that cash pile in future, should the acquisition of a stake in Swiss Re go ahead, it’s unlikely to be the biggest driver at this time.
The FT says that the discussions are focused on SoftBank taking a 20% to 30% stake, with multiple board seats, becoming an anchor investor in Swiss Re. The deal would be funded by the company, not SoftBank’s investment fund, the FT says.
UBS is said to be working on the deal, facilitating the discussions for SoftBank. While Credit Suisse is assisting Swiss Re.
The benefits of such a deal are much deeper than just having access to Swiss Re’s investment portfolio. They run both ways and involve the integration of risk transfer and financing into SoftBank’s portfolio of businesses, distribution opportunities, as well as the integration of advanced technologies into Swiss Re.
Further rumours about the potential SoftBank investment include whether Swiss Re could use it to fund its own acquisition.
