PartnerRe agrees to be bought by EXOR, terminates merger agreement with Axis Capital

PartnerRe Ltd. and Axis Capital Holdings Ltd., which write reinsurance and commercial primary insurance worldwide, announced Monday they have terminated a merger agreement now that PartnerRe has “reached a definitive agreement” to be bought by EXOR S.p.A. for about US$6.9 billion.

 Both PartnerRe and Axis Capital are based in Pembroke, Bermuda and have branch offices in Toronto. The boards of both firms announced Jan. 25 an agreement to merge, which was subject to approval of shareholders. At the time, Axis said a merger would create a global top 5 reinsurer.

Axis Capital stated Monday it “has accepted a request” from PartnerRe to “terminate” the merger agreement with Axis Capital and PartnerRe will pay Axis Capital a $315 million breakup fee. All figures are in United States dollars. An Aug. 7 meeting, in Bermuda, of Axis Capital shareholders, has been cancelled. Both PartnerRe and Axis Capital are traded on the New York Stock Exchange.

On April 14, EXOR announced an offer to acquire all shares of PartnerRe for US$130 each. Since then, EXOR and PartnerRe had increased their respective offers to PartnerRe shareholders.

Partner Re said earlier 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.”

Related: EXOR announces new terms of PartnerRe takeover offer

But on Aug. 3, EXOR said it has now agreed to acquire PartnerRe for $137.50 a share plus a $3 special dividend. If the deal is approved, PartnerRe expects it would close in 2016.

“The transaction requires the approval of PartnerRe shareholders at a special general meeting to be called as soon as reasonably practicable,” EXOR stated.

Turin-based EXOR owns about 44% of voting rights of Fiat-Chrysler Automobile. Its other holdings include a majority of commercial real estate firm Cushman & Wakefield (which EXOR earlier agreed to sell) and nearly 40% of voting rights of CNH Industrial N.V., whose products include power trains and commercial vehicles, as well as farming and construction equipment under the Case and New Holland brands.

Related: EXOR files securities documents in effort to acquire reinsurer PartnerRe

EXOR’s agreement to acquire PartnerRe “includes a ‘go-shop’ period, during which the PartnerRe Board will actively solicit and evaluate any competing offers and is permitted to enter into negotiations related to any proposals received prior to September 14, 2015, in each case subject to customary restrictions,” PartnerRe stated. “There can be no assurance that this process will result in a superior proposal.”

The proposed merger between Axis Capital and PartnerRe “stood to create a powerful mix of two financially strong and independent companies with compelling insurance/reinsurance franchises,” stated Albert Benchimol, president and CEO of Axis Capital, in a press release Monday. “While I am disappointed that the merger will not proceed, I have no doubt that the best days for AXIS Capital, our employees, clients, brokers and shareholders lie ahead. We have built a powerful global platform on which to continue to advance our hybrid insurance model with three diversified businesses in specialty insurance, reinsurance, and accident and health.”

On June 29, PartnerRe had stated EXOR’s offer “poses significant and unacceptable risks, while also substantially undervaluing” PartnerRe. Then on July 7, EXOR increased its offer, adding in the “go shop” provision in its proposal. Three days later, PartnerRe and Axis Capital stated they were “jointly exploring enhancements” to the terms of their proposal.

Related: PartnerRe board of directors rejects takeover offer from EXOR

On July 16, PartnerRe announced it would increase a special dividend – to $17.50 a share – shareholders were to approve a merger with Axis Capital.

“We have carefully and thoroughly evaluated each development over the past several months, and believe that this thoughtful and deliberate approach was critical to delivering a transaction that represents a significant improvement in the price and terms of EXOR’s original proposal,” PartnerRe chairman Jean-Paul Montupet stated in the company’s Aug. 3 release. “Importantly, EXOR is committed to ensuring that the unique culture, brand and business that our dedicated employees have successfully built over the past 20 years remain intact.”

In 2013, PartnerRe and Axis Capital were ranked 10th and 15th, by A.M. Best Company Inc., in non-life reinsurance premiums. The top five in 2013 were Munich Re, Swiss Re, Hannover Re, the Lloyd’s market and SCOR SE. That year, SCOR reported $6.675 billion in non-life reinsurance premiums while PartnerRe and Axis Capital had $4.59 billion and $2.138 billion respectively.