May 5, 2015 by Canadian Underwriter
PartnerRe Ltd., a Bermuda-based reinsurer and commercial insurance carrier with a Toronto office, announced Monday its board of directors has rejected a takeover offer from investment firm EXOR S.p.A. and proposed new terms of a previously-announced offer to merge with a different insurer, Axis Capital Holdings Ltd.
Last January, PartnerRe and Axis Capital announced that the boards of directors of both companies approved a merger agreement, which is subject to approval from shareholders and regulators. Like PartnerRe, Axis Capital is based in Pembroke, Bermuda and has a Toronto office.
In their original merger agreement, PartnerRe and Axis Capital proposed to have PartnerRe shareholders receive 2.18 shares of the combined company for each share of PartnerRe common shares they own, and for Axis Capital shareholders to receive one share of the post-merger firm for each share of Axis Capital common shares they own.
Axis provides both commercial primary coverages in Canada (including liability and cyber) as well as reinsurance. The Canadian branch of PartnerRe U.S. is licensed to write property and casualty business in Ontario and Quebec.
Worldwide, PartnerRe reinsures property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy and marine, among others. It also provides primary reinsurance, including aviation, energy, engineering and marine. Axis Capital’s primary insurance lines, worldwide, include property, marine, aviation and liability. It reinsures catastrophes as well as property, professional lines, engineering, surety, auto and agriculture.
If PartnerRe were to merge with Axis Capital, the combined firm would be “a top-five global reinsurer,” with gross written premiums in excess of $10 billion a year, the companies stated Jan. 25. All figures are in U.S. dollars.
But on April 14, EXOR submitted a proposal to PartnerRe’s board of directors to acquire all PartnerRe shares for $130 each, valuing the firm at $6.4 billion. Turin, Italy-based EXOR, which is controlled by the Agnelli family, was a minority investor in PartnerRe when it was formed in 1993. EXOR’s holdings include about 44% of voting rights in Fiat-Chrysler Automobile, the majority of real estate firm Cushman & Wakefield and a significant minority of CNH Industrial N.V., whose products include power trains as well as construction and agriculture equipment under the Case and New Holland brands.
EXOR said April 14 its offer “is envisaged to be friendly (and) can be completed expeditiously.” PartnerRe stated the same day that “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.”
Then on May 4, PartnerRe announced its board “has rejected” EXOR’s proposal and has “further reaffirmed its commitment to the planned merger with Axis, though it has changed the terms of the Axis deal to provide for a one-time special dividend, of $11.50 per share, to PartnerRe shareholders if the merger with Axis Capital is approved. The merger is still subject to regulatory and shareholder approval.
“PartnerRe shareholders will ultimately decide which transaction is superior,” EXOR stated in a press release May 4. “EXOR is therefore determined to pursue its transaction on the proposed terms and is fully committed to achieving its rapid completion.”
PartnerRe stated 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.” PartnerRe shares closed Monday at $126.93, though they were trading at less than $120 the day before EXOR announced its acquisition offer.
PartnerRe’s board of directors “determined that superior value is created through the enhanced merger terms with AXIS Capital, and the substantial long-term value potential of the combination with AXIS Capital,” PartnerRe stated May 4.
EXOR stated Monday its proposal “is financially superior, with no financing conditions, can be completed swiftly and will retain and build upon PartnerRe’s highly talented management and employees.”
As part of the original merger agreement with Axis Capital, Costas Miranthis stepped down as PartnerRe chief executive officer in January. The interim CEO is now David Zwiener, chairman of the audit committee of the PartnerRe board of directors.
In 2014, PartnerRe reported $4.667 billion in gross written premiums in non-life while Axis Capital reported gross written premiums of $2.535 billion – including accident and health – in insurance. On top of that, Axis Capital reported $2.176 billion in gross written premiums in 2014 in reinsurance.
By comparison, in 2014, Munich Re reported 16.73 billion euros in gross written premiums in P&C reinsurance, Swiss Re reported US$15.598 billion in premiums earned in P&C reinsurance, 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. Also in 2014, Berkshire Hathaway Inc. reported US$4.064 billion in P&C premiums earned from Berkshire Hathaway Reinsurance Group and US$3.103 billion in premiums earned from General Re. The euro was trading at $1.34 Tuesday while the U.S. dollar was trading at $1.20.