Talks between reinsurance firm Swiss Re and Japanese technology conglomerate giant SoftBank over a potential investment stake in the reinsurer are said to have stalled, with price, the size of the stake and level of control said to be sticking points.
Bloomberg said its sources told the news publisher that talks are not making progress, with the recent disclosure by the reinsurer that any investment stake offered to SoftBank would be restricted to a maximum of 10% said to be a key issue that has held the discussions back.
Swiss Re recently explained that negotiations were ongoing over a potential minority investment by SoftBank in the reinsurer, but that any investment would be expected not to exceed 10% of Swiss Re’s share capital.
That restriction, which would reduce the amount of control any investor such as SoftBank would have in the reinsurer, is said to have brought negotiations to a standstill now, according to Bloomberg’s sources.
Bloomberg said that the pair of companies have disagreed on more than just the size of the stake and resulting control as well, with the price said to be another point of contention.
Swiss Re’s share price has risen in recent weeks, since the discussions with SoftBank first emerged back in February.
The size of the stake had previously been rumoured to be as large as 25% of Swiss Re’s share capital, but the reinsurer clarified that it did not expect any deal to involve more than a 10% stake.
Of course SoftBank founder Masayoshi Son is being likened to Warren Buffett, given his interest in a major reinsurance firm. But the technology and telecoms conglomerate has much more to gain than just access to investment float.
The potential benefits of a tie-up seem clear, with benefits evident for both sides should the pair be able to come to agreement.
Swiss Re is not the only major reinsurer open to discussions with a major investor, Munich Re recently said it would not be averse to finding an anchor shareholder as well.
If SoftBank’s Son cannot gain a stake in the re/insurance market through a share in Swiss Re he is likely to look elsewhere and it wouldn’t be surprising if the investor had already made initial approaches to other major market players.
But the rumoured differences between Swiss Re and SoftBank, over the size of the investment, the price and the level of control on offer, are all typical of major M&A negotiations and the investment process, so there is every chance the differences can be overcome and a relationship consummated between the pair.
The benefits of finding common ground and cementing the relationship between a global reinsurance major and a tech giant remain clear, potentially transformative for Swiss Re, while more than additive for SoftBank.