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Exor ups the stakes in PartnerRe bidding war

Increased offer: Exor chairman and CEO John Elkann, whose firm has raised the stakes once more in the bidding war for PartnerRe

Italian investment giant Exor today upped the stakes in a poker game for control of Bermuda reinsurer PartnerRe.

Exor has added a $3 per share dividend sweetener to its $137.50 a share bid for control of the firm.

The move brings the value of Exor’s offer to $140.50 per common share for shareholders, which is up against a proposed $11 billion merger with Axis Capital favoured by the PartnerRe board.

Exor said: “This additional $3 per share of real incremental value to PartnerRe common shareholders further widens the gap in value with the Axis transaction.”

The Exor statement added that the Axis transaction’s increase in the special dividend announced earlier this month amounted to $1 a share after adjustments for the ownership split in the combined Axis/PartnerRe, reported declines in the s2015 second quarter tangible book value of both firms and the costs associated with a 100 basis-point increase in the dividend rate for PartnerRe preferred shares.

The Exor statement added: “Through its actions, PartnerRe’s board has effectively acknowledged the superiority of the Exor binding offer by seeking enhanced terms with Axis.

“This is the second time the PartnerRe board has sought to improve its terms with Axis to respond to the Exor offer, which continuing to claim that the Exor offer is inferior.”

A spokesman for Axis said: “The value of our merger agreement with PartnerRe is superior to the Exor offer both immediately and in the future — we provide continuity of interest for investors to participate in the future upside of the combined company, the exchange of PartnerRe common stock for combined company common stock in the amalgamation is tax free to PartnerRe shareholders, we offer deal closing certainty ahead of the upcoming renewal season and the combined company will have a superior credit profile.”

The Italian firm, controlled by billionaire Agnelli family, dismissed claims that the US Internal Revenue Service (IRS) would treat preferred shares in PartnerRe as part of a “listed transaction” or “prohibited tax shelter” involving “fast pay stock” under the Exor bid.

The statement added: “Although Exor and its advisers do not believe a ruling from the IRS is necessary, in light of PartnerRe statements to shareholders to the contrary, which avoid a truly committed exchange offer in the Axis/PartnerRe transaction, Exor is also willing to seek a private letter ruling from the IRS that the preferred shares issued in the exchange do not constitute ‘fast pay stock’ or are not otherwise part of a listed transaction.”

And it said that — if a private letter ruling could not be obtained in time or at all if the IRS were to decide there is no abuse intended in the transaction and declined to spend time and resources on the issue, Exor would give a lump sum cash payment of around $42.7 million, equivalent to the entire amount of 100 basis points of additional dividend payments for five years.

The cash would be payable to preferred shareholders in PartnerRe as the successful conclusion of Exor’s bid for PartnerRe.

PartnerRe and Axis shareholders will meet on Friday to vote on the merger deal.

Exor raised its original $6.4 billion bid for PartnerRe — equivalent to $130 a share — to $6.8 billion, or $137.50 a share, in May.

The cash deal went up against the all-share merger proposition and Exor said it intended to retain PartnerRe as a stand-alone company and keep existing management and staff.

The Axis-PartnerRe deal would create the world’s fifth largest reinsurer and the two companies have said joining forces would save $200 million a year — with some of the savings from redundancies among the combined Bermuda-based staff of around 130.

And the two reinsurance firms, near-neighbours on Pitts Bay Road in Pembroke, would also probably require less office space.