EXOR announces new terms of PartnerRe takeover offer

EXOR S.p.A. announced Tuesday it is improving its US$6.8-billion offer to acquire Pembroke, Bermuda-based PartnerRe Ltd., a reinsurer and commercial insurance carrier with a branch office in Toronto.

Last April, Turin, Italy-based EXOR – an investment firm controlled by the Agnelli family – announced an offer to acquire PartnerRe for US$130 per share. However, PartnerRe’s board of directors had already recommended a merger with Axis Capital Holdings Ltd., another Bermuda-based reinsurer and commercial insurer. Shareholders of both Axis Capital and PartnerRe are scheduled to vote July 24 on the proposed merger, which is also subject to regulatory approval.

EXOR later increased its offer to $137.50 per share. All figures are in United States dollars.

In a press release July 7, EXOR suggested it would “effectively” increase its offer to $143.89 per share if Axis Capital and PartnerRe shareholders vote against merging their firms.

“As part of the AXIS transaction, PartnerRe and AXIS agreed to an aggressive termination and expense reimbursement fee of $315 million (over 4.5% of the deal value) to ward off potential bidders,” EXOR stated. “This is worth $6.39 per share to PartnerRe shareholders. In the event both PartnerRe and AXIS shareholders vote down the PartnerRe/AXIS transaction, and hence this fee is not payable by PartnerRe, EXOR commits to pass this value on to PartnerRe shareholders in full, effectively increasing the value of its Binding Offer to $143.89 per share.”

EXOR also suggested July 7 that if its acquisition were approved, it would include a “go shop” provision, which would “permit PartnerRe to actively solicit bids, share due diligence materials and negotiate with third parties until August 31, 2015, so that shareholders have assurance that the EXOR Binding Offer remains the superior alternative for the company.”

Axis Capital and PartnerRe would have gross written premiums of more than $10 billion if they merged, the firms said earlier. When they announced their boards agreed to a merger Jan. 25, Costas Miranthis stepped down as PartnerRe CEO and resigned from PartnerRe’s board of directors. Miranthis was replaced on an interim basis, as CEO, by David Zwiener.

EXOR originally announced April 14 a takeover offer, which EXOR said at the time was “envisaged to be friendly.”

But on June 3, EXOR announced it filed a “definitive proxy statement” with the U.S. Securities and Exchange Commission States “in opposition” to PartnerRe’s proposed merger with Axis, urging PartnerRe shareholders to reject a merger with Axis.

PartnerRe and Axis ranked 10th and 15th respectively – by non-life gross written reinsurance premiums in 2013 – in a list compiled by A.M. Best Company Inc. in 2014. Axis said earlier a merger would create a global top 5 reinsurer. In 2013, according to A.M. Best, Munich Re ranked first, followed by Swiss Re, Hannover Re, the Lloyd’s market and SCOR SE.

A merger with Axis Capital “makes strategic sense in an evolving industry environment characterized by continued consolidation and new forms of reinsurance and insurance capital which creates opportunities to better withstand cyclical volatility,” PartnerRe stated in a June 1 release.

But EXOR stated June 3 that if it buys PartnerRe, the carrier would have an “opportunity” to grow “as a standalone, leading, pure-play reinsurer, without the pressures of being a public company.”

In Canada, PartnerRe provides both life and property & casualty reinsurance, as well as primary insurance in specialty lines. Worldwide, PartnerRe reinsures property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy and marine, among others. Its primary lines include aviation, energy, engineering and marine.

Axis Capital provides primary commercial lines in Canada – including liability and cyber – and reinsurance for property, casualty, professional liability, surety and regional multiline, among others. In the Lloyd’s market, Axis Syndicate 1686 provides coverage for property, terrorism, marine, energy, aviation, casualty and professional lines.