Agnellis in race with Axis to buy PartnerRe
The family behind Italian car giants Fiat and Alfa Romeo has launched a $6.4 billion drive to buy Bermuda-based reinsurer PartnerRe.
The move means Exor is now in a race with Axis, which has already announced a bid to merge with PartnerRe.
Exor — a top investment company controlled by the Agnelli family, which owns nearly a third of Fiat Chrysler — has offered $130 a share in cash in a bid to acquire 100 per cent of the firm.
Exor has invested successfully in the insurance and reinsurance sectors for more than two decades, including as a minority investor in PartnerRe when it was formed in 1993.
John Elkann, Exor chairman and CEO, said: “We strongly admire the PartnerRe business and its people.
“Our proposal provides superior value for PartnerRe shareholders with the certainty of a cash offer.
“It also represents a great opportunity for the company’s management and employees to continue to develop PartnerRe’s outstanding potential as a leading global reinsurer with our committed and stable ownership.
“We have every confidence that the PartnerRe board, employees and shareholders will support our proposal and create the conditions for us to bring this offer to fruition swiftly.”
Last night PartnerRe, whose shares closed up 8.5 per cent up last night at $129.25, said its board would review the “unsolicited” buyout bid.
A spokesman for PartnerRe said: “As was previously announced on January 25, 2015, PartnerRe has entered into a definitive amalgamation agreement with Axis Capital to combine and create one of the world’s leading speciality insurance and reinsurance companies.”
But the spokesman added: “Consistent with its fiduciary duties, the PartnerRe board of directors will review the Exor proposal to determine the course of action that it believes is in the best interests of PartnerRe and its shareholders.
“The board will announce its position regarding the Exor proposal following its review, which will be completed in due course.”
Analysts last night appeared to back the Exor bid.
Macquarie’s Amit Kumar said that PartnerRe shareholders should accept the offer, while Janney Capital Markets analyst Ryan Byrnes said that $250 million break clause was “not a bad consolation prize” for Axis.
But Meyer Shields of KBW predicted that Axis would increase its bid and include a special dividend for PartnerRe shareholders.
The Italian company said there was “significant long-term potential for a global reinsurer such as PartnerRe”.
Exor added PartnerRe’s underwriting expertise, significant financial strength, scale and diversification would be enhanced by Exor’s permanent capital base and ability to deploy additional resources to accelerate growth under the right conditions — and strengthen its position in the global market.
Exor said it invested in global companies with strong earnings capacity, a sound financial structure and a sustainable competitive advantage.
And it added it provided its businesses with operational autonomy, enabling management teams to build world-class organisations over time.
A spokesman for the firm said: “Accordingly, Exor’s proposal provides management and employees with a unique opportunity to successfully develop the PartnerRe business as a stand-alone private company, focusing on its long-term prospects, better managing the volatility of the reinsurance cycle and proactively seizing market opportunities.”
He added: “The proposed Exor transaction, which is envisaged to be friendly, can be completed expeditiously.
“Compared to the all-share combination with Axis, it provides PartnerRe shareholders with superior value and greater certainty since it is all cash, fully financed, and does not require a capital increase by Exor nor a vote by its shareholders.”
Exor is listed on Milan Stock Exchange and has a market capitalisation of around $11 billion and a net asset value of approximately $14 billion.
The firm has been in the investment business for more than a century, including the recent acquisition of Chrysler by Fiat, creating the world’s seventh largest car producer with a $21 billion market capitalisation.
The proposal represents a 16 per cent premium to the implied value per share of $112.53 for PartnerRe under the Axis agreement.
Exor’s proposal is also 1.13 times PartnerRe’s diluted tangible book value per share as of December 31, 2014, in contrast to the proposed AXIS transaction which is priced at a discount to PartnerRe’s diluted tangible book value per share.
The spokesman added the bid was subject to termination of PartnerRe’s agreement with Axis and execution of definitive agreements and approval by PartnerRe’s shareholders and said it was hoped to close the deal this year.
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