Canadian Underwriter

EXOR increases all-cash offer to take over PartnerRe ‘upon termination’ of merger agreement with Axis Capital

May 12, 2015   by Canadian Underwriter

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EXOR S.p.A. announced Tuesday it is increasing, to US$6.8 billion, its offer to buy PartnerRe Ltd., a reinsurer and commercial insurance carrier whose board of directors previously agreed to merge with Axis Capital Holdings Ltd.

Both PartnerRe and Axis are based in Pembroke, Bermuda and offer coverage in Canada from offices in Toronto. On Jan. 25, PartnerRe and Axis Capital announced the directors of both firms unanimously approved a merger agreement. If approved by shareholders and regulators, the merger would create a firm that Axis contends would be a global top 5 reinsurer.

Then on April 14, EXOR, a Turin, Italy-based investment firm, submitted a proposal to acquire all PartnerRe shares for $130 each, valuing the firm at $6.4 billion. All figures are in United States dollars. At the time, EXOR’s proposal was submitted to PartnerRe’s board and was “envisaged to be friendly.”

EXOR S.p.A. is offering to acquire reinsurer and commercial insurance carrier PartnerRe Ltd., (NYSE: PRE) which had previously agreed to merge with Axis Capital Holdings Ltd. (NYSE: AXS)

After considering the EXOR offer, PartnerRe announced May 4 its board rejected EXOR’s takeover offer, stating in a release that “throughout the course of negotiations, EXOR maintained its $130 per share proposal, and indicated that due diligence on PartnerRe would be ‘confirmatory’ only and that there would be no price improvement.”

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But on May 12, EXOR announced it delivered an “irrevocable and binding offer” to PartnerRe’s board to buy all PartnerRe shares for $137.50 each. That offer is “not subject to due diligence,” EXOR said, adding it is filing preliminary proxy materials with the U.S. Securities and Exchange Commission “in connection with PartnerRe’s upcoming special general meeting of its shareholders.” That special meeting is expected to be held July 13, EXOR stated.

EXOR’s SEC filing would let EXOR “solicit PartnerRe shareholders” to vote against the proposal to merge with Axis Capital, EXOR stated.

EXOR, which is controlled by the Agnelli family, owns a significant minority of voting shares of both Fiat-Chrysler Automobile and in CNH Industrial N.V., whose wares include power trains and construction and agriculture equipment, under the Case and New Holland brands. EXOR also owns the majority of real estate firm Cushman & Wakefield.

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The Canadian branch of PartnerRe U.S. is licensed to write property and casualty business in Ontario and Quebec. Axis provides primary commercial insurance in Canada, plus reinsurance.

At the time PartnerRe and Axis Capital announced their merger agreement in January, Costas Miranthis stepped down as PartnerRe CEO and resigned from the board. David Zwiener, chairman of the audit committee of the PartnerRe board of directors, is now interim CEO of PartnerRe. He was previously chief financial officer at Wachovia Corp. and president and chief operating officer of the property and casualty operations at Hartford Financial Services Group Inc.

Under the terms of the original merger agreement, shareholders of both Axis Capital and PartnerRe would be issued shares in the new firm, such that PartnerRe shareholders would own 51.6% of the merged firm and Axis Capital shareholders would own the other 48.4%.

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On May 4, PartnerRe said it was proposing new terms, which would give PartnerRe shareholders a one-time dividend of $11.50 per share.

EXOR said May 12 its all-cash takeover offer “preserves PartnerRe’s franchise with continuity of management and brand” and that if EXOR takes over PartnerRe, EXOR “will empower PartnerRe management to continue to operate the business with autonomy, guided by our entrepreneurial mindset and long-term vision for the franchise.”

EXOR added its offer “can be executed by PartnerRe immediately upon termination” of the merger agreement with Axis Capital, and will expire either July 11, or two days after the Axis Capital merger agreement is terminated, whichever is earlier.

“EXOR’s commitment to its offer is underscored by its decision to invest $572 million in PartnerRe, representing 9.32% of the total outstanding common shares. EXOR is now PartnerRe’s largest shareholder,” EXOR stated May 12.

EXOR invested in PartnerRe when it was originally formed in 1993.

Axis Capital CEO Albert A. Benchimol stated January 25 that a merger between his firm and PartnerRe would form

“a top-five global reinsurer, a $2.5 billion specialty insurance underwriting business, and a highly successful and growing life, accident and health.”

In an Axis press release, Benchimol stated of the proposed merger: “As a top five global reinsurer with leading positions in a number of specialty lines, we will be strongly positioned to turn the challenges presented by the structural changes in the reinsurance market into opportunities.”

In 2014, Axis Capital reported gross written premiums of $2.535 billion – including accident and health – in insurance, plus $2.176 billion in gross written premiums in reinsurance. PartnerRe reported $4.667 billion in gross written premiums in non-life in 2014.

Munich Re and Swiss Re both reported more than $15 billion in P&C reinsurance premiums last year, while Hannover Re reported 7.9 billion euros in gross written premiums in P&C reinsurance and SCOR SE reported 4.935 billion euros in gross written premiums in global P&C. Two reinsurers owned by Omaha, Neb.-based Berkshire Hathaway Inc.- Berkshire Hathaway Reinsurance Group and General Re – reported a combined total of about $8.1 billion in premiums earned last year.

PartnerRe said in an earlier SEC filing that in addition to Hamilton, Bermuda, its “principal” offices are in Dublin, Greenwich, Conn., Paris and Zurich. Worldwide, PartnerRe provides reinsurance and specialty lines, including property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy, marine, specialty property, specialty casualty and multiline, among others.

Worldwide, Axis Capital has operations in Bermuda, the U.S., Europe, Singapore, Australia and Latin America. Its primary coverages in Canada include liability and cyber. Its reinsurance coverage in Canada includes property, casualty, professional liability, surety and regional multiline, among others. Its Lloyd’s syndicate is authorized to write insurance in or from Canada, with several exceptions, including hail insurance in respect of crop in Quebec.

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