MILAN (Reuters) - Investment group Exor (EXOR.MI), which controls carmaker Fiat Chrysler (FCHA.MI) (FCAU.N), said on Monday it had signed a deal to buy PartnerRe PRE.N for $6.9 billion (£4.43 billion), trumping a rival bid from Axis Capital (AXS.N) and ending a prolonged battle for the reinsurer.
Exor, the investment vehicle of Italy’s Agnelli family, wants to branch out into financial services with its steadier and higher returns and limit its exposure to the more capital-intensive and cyclical automotive sector.
The agreement marks a U-turn for PartnerRe, which in January had agreed a merger with Axis to create one of the world’s largest reinsurers and repeatedly spurned approaches from Exor, despite sweetened offers.
Sources familiar with the matter told Reuters last week that PartnerRe was finally willing to negotiate a deal with the Italian group after three proxy advisers recommended that its shareholders vote against the tie-up with Axis.
“Whether by design, or by fortuity, the PartnerRe board of directors managed to secure substantial incremental value for PartnerRe shareholders relative to the initial terms of the
Axis/PartnerRe deal,” Wells Fargo analyst John Hall said.
Exor, which is also seeking to increase its stake in publisher The Economist, said it would pay $137.50 for each PartnerRe share and also offer a $3 special dividend per share, in line with its latest, improved offer.
Its overall $140.50 per share offer amounts to a 30 percent premium to Axis’s initial all-stock bid valued at $107.53 per share on Jan. 25, according to Reuters calculations. During the seven-month saga, Axis’s offer came close to Exor’s and included a special dividend in cash for PartnerRe shareholders.
Exor’s shares closed up 1.2 percent at 46.40 euros. PartnerRe’s shares were up 2.4 percent at $139.20 while Axis was up almost 4 percent at $59.81.
PartnerRe shareholders were supposed to vote on the combination with Axis at an Aug. 7 meeting, but that was cancelled after the two reinsurers terminated their merger agreement. PartnerRe will pay Axis a $315 million break-up fee.
Exor has for months engaged in a battle of words with the board of Bermuda-based PartnerRe, seeking to convince PartnerRe shareholders that its offer was preferable. It became PartnerRe’s largest single investor with a stake of around 10 percent in a bid to lobby fellow shareholders.
Fighting a bitter bidding war that at times appeared to jar with his soft-spoken and discreet management style, Exor Chief Executive John Elkann, scion of Fiat’s founding Agnelli family, said from the start he was very determined in his pursuit of PartnerRe and improved his offer several times. Exor has said it was attracted by the “long-term potential” of PartnerRe, a company in which it began investing as far back as 1993.
Exor said its agreement with PartnerRe includes a provision allowing the reinsurer to evaluate any competing offers received before Sept. 14, although the market largely believes another suitor is unlikely. The Exor takeover requires the approval of the reinsures shareholders.
The deal is expected to close by the first quarter of 2016. Exor has committed to paying PartnerRe $225 million as a partial reimbursement of the Axis break-up fee under certain conditions.
Axis said in a separate statement that it was committed to its stand-alone strategy, although several analysts suggested that the reinsurer would now likely become a takeover target.
Reinsures, which help insurers pay large damage claims in exchange for part of the profit, are under pressure to consolidate after being squeezed by price competition and weak demand from insurers amid record low interest rates.
Additional reporting by Mike Stone in New York; Editing by Susan Fenton and Greg Mahlich