European investment company EXOR has emerged as a second suitor for PartnerRe Ltd. with the announcement of its proposed $6.4 billion all-cash acquisition of the Bermuda-based reinsurer.
If accepted, the EXOR bid could leave PartnerRe merger partner AXIS Capital Holdings out in the cold, upending an M&A deal first announced in January.
“We strongly admire the PartnerRe business and its people,” explained EXOR Chairman and CEO John Elkann in prepared remarks. “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 lead global reinsurer with our committed and stable ownership.”
There’s no word yet on how this last-minute offer will affect plans for AXIS Capital Holdings Ltd. to merge with PartnerRe in a stock deal to create a Bermuda-based reinsurance powerhouse with a total market value of nearly $11 billion. EXOR submitted its offer to the PartnerRe board of directors in writing on April 14.
PartnerRe, in a prepared statement, termed EXOR’s offer an “unsolicited offer,” noting its board would review the proposal “to determine the course of action that it believes is in the best interest of PartnerRe and its shareholders.”
PartnerRe said it would announce its response after reviewing the EXOR offer. It did not set a specific deadline, noting the review “will be completed in due course.”
There’s plenty to review and compare.
The AXIS deal would leave PartnerRe shareholders owning 51.6 percent of the new company, with AXIS investors owning 48.4 percent. Expectations are that their merger would close in the 2015 second half.
But EXOR bills its bid to buy 100 percent of PartnerRe’s common shares at $130 each as the superior deal, based on the average of AXIS’s closing prices for the 10 days ending on April 13. EXOR said the all-cash offer is a 16 percent premium to the implied value per share of $112.53 for PartnerRe in its merger agreement with AXIS. PartnerRe, in this scenario, would continue as a standalone private company, and EXOR said it would help it “better manage the volatility of the reinsurance cycle” and also proactively “seize market opportunities.”
“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 explained in its offer announcement.
EXOR termed its offer as a “friendly” one that can be completed quickly, in part because EXOR’s shareholders have already approved it. EXOR said it would close its acquisition in 2015, assuming PartnerRe’s board of directors is on board with the offer with its “full cooperation.”
“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,” Elkann said.
What is EXOR? It is a major European investment company and also listed on the Milan Stock Exchange. EXOR has a market capitalization of $11 billion and a net asset value of approximately $14 billion. EXOR said it has invested in global companies “with strong earnings capacity,” giving them operational autonomy. Fiat Chrysler Automobiles is one of its portfolio companies, EXOR said.
Albert Benchimol, President and CEO of AXIS, responded to news of a rival offer with PartnerRe by asserting that he still believes an AXIS/PartnerRe merger is the best bet.
“AXIS Capital is fully committed to its combination with PartnerRe Ltd.,” Benchimol said.”Our transaction with PartnerRe brings together two independently strong companies to create one broadly diversified global specialty insurance and reinsurance company whose scale, capital and enhanced market presence will form a powerhouse within the industry.”
He also emphasized that the deal will “deliver superior and sustainable value to all shareholders.”
In fact, both companies disclosed at the end of the March that they had received early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 regarding their merger deal.
*This story was updated with comments from AXIS Capital and PartnerRe.