According to reinsurance giant Swiss Re this morning, the talks with Japanese technology conglomerate and investor SoftBank Group are continuing, but the expectation is that if a deal is struck it will be for a maximum of 10% of the reinsurers share capital.
The reinsurer explained this morning that, “negotiations are still ongoing in respect of a minority investment by SoftBank in Swiss Re, currently expected not to exceed 10% of Swiss Re’s share capital.”
That’s a much smaller stake than has been discussed in the media, where figures narrowed on a 25% investment.
However Swiss Re also revealed that it is open to other options, aside from the straight investment, and the pair are “exploring areas of potential strategic cooperation.”
Swiss Re reiterated that it is not considering any issue of new capital to support the investment, as its capital position remains strong enough to support such an investment.
The talks remain at an early stage, the reinsurer said, and Swiss Re continued to emphasise that there is no certainty a deal or investment will be agreed upon.
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.
SoftBank has been said to be nearing a deal with Swiss Re for up to a 25% investment, but Swiss Re is clearly focusing on a deal of less than 10%, likely not wanting to give away too much control.
However the potential benefits to the reinsurer perhaps suggest that the size of the stake is not the important issue here, rather it is finding the right terms to engage in a potentially transformative partnership, such as with SoftBank, to ensure the maximum value is extracted from it for the business and its shareholders.