PartnerRe, after fighting for months against an unsolicited bid from the Italian investment firm EXOR, has finally relented, agreeing to its overtures to buy the Bermuda-based reinsurer for $6.9 billion.

A decision to switch suitors won’t be cheap: PartnerRe must pay a $315 million break-up fee to AXIS Capital Holdings, the rival with which it first announced a planned merger in January. (PartnerRe first approached AXIS about merging last December, AXIS disclosed in its release announcing the merger termination.)

If regulators and PartnerRe shareholders approve the transaction, the deal should close by the 2016 first quarter. Partner stands to gain $225 million – a partial reimbursement of its breakup fee with AXIS – if there are any legal or regulatory obstacles that prevent a deal closure within 12 months of signing.

The EXOR/PartnerRe deal comes after frequent back-and-forth bid escalations and bid rejections, and PartnerRe’s regular affirmations that its planned merger with AXIS was in the best interest of shareholders and the company. ParterRe Chairman Jean-Paul Montupet said that the change of heart in agreeing to be sold to EXOR came down to maximizing shareholder value.

“Since EXOR made its initial offer to acquire the company in April 2015, the PartnerRe Board has been focused on maximizing value for our shareholders while positioning PartnerRe for long-term success,” Montupet said in prepared remarks. “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.”

Montupet added that “EXOR is committed to ensuring that our unique culture, brand and business that our dedicated employees have successfully built over the past 20 years remain intact.”

Shareholders with Partner and AXIS had been scheduled to vote on their planned merger on Aug. 7, a deal they had sweetened in a number of ways to counter EXOR’s then-$137.50 per share cash offer for PartnerRe. The shareholder meetings are now canceled, though PartnerRe must schedule a new meeting to address the EXOR agreement.

EXOR finally won by increasing its offer again, leaving PartnerRe agreeing to talk if EXOR would further enhance its bid. EXOR’s final, winning offer came to $137.50 per share in cash, plus a $3 per share special dividend. The agreement also includes something known as a “go-shop” period, during which PartnerRe’s board can solicit and evaluate any competing offers to EXOR’s that come in before Sept. 14, 2015 and enter into negotiations.

EXOR Chairman and CEO John Elkann said that the EXOR/PartnerRe deal is a positive one for both companies.

“Under our stable and committed ownership, PartnerRe will continue to develop as a leading independent global reinsurer,” Elkann said in prepared remarks. “EXOR looks forward to working with the board of directors and the management of PartnerRe to ensure a successful path forward.”

So what of AXIS? Albert Benchimol, president and CEO of the Bermuda insurer and reinsurer, said he is confident about moving ahead as a standalone company.

“Our proposed transaction with PartnerRe stood to create a powerful mix of two financially strong and independent companies with compelling insurance/reinsurance franchises,” Benchimol said in a prepared statement. “While I am disappointed that the merger will not proceed, I have no doubt that the best days for AXIS Capital … 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.”

Now that AXIS is again on its own, the company said it has resumed its share repurchase program, which has $749 million remaining under the board’s current authorization through Dec. 31, 2016.

Sources: PartnerRe, EXOR, AXIS Capital Holdings

Topics Mergers & Acquisitions Reinsurance