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Surprise bid creates reinsurance merger triangle


Exor S.p.A.'s $6.4 billion surprise bid for Bermuda reinsurer PartnerRe Ltd. presents Partner shareholders with a dramatically different alternative to the merger proposed by Axis Capital Holdings Ltd. while putting Axis in the position of having to respond.

Exor was not on the reinsurance radar.

“When we think of M&A in the space, Exor wasn't a name that came up,” said Cliff Gallant, an analyst with Nomura Securities International Inc. in San Francisco.

Italy's Exor S.p.A. is a European-listed investment company controlled by the Agnelli family, perhaps more widely known for their stewardship of the Fiat industrial empire including Ferrari, which is to be spun out to shareholders together with a public sale of shares.

In late January, Axis and PartnerRe announced an $11 billion merger to create the world's fifth largest reinsurer.

When made, Exor's all-cash proposal represented a 16% premium to the implied value per share of $112.53 for PartnerRe under the Amalgamation Agreement between PartnerRe and Axis Capital Holdings, but Partner stock has risen steadily since then.

For its part, Axis has said it remains committed to the deal.

“Axis Capital is fully committed to its combination with PartnerRe Ltd.,” said Albert Benchimol, president and CEO of Axis Capital, in a statement the day of Exor's offer which added, “Axis Capital said that it will have no further comment on the Exor proposal at this time.”

The unanticipated move has analysts split.

“Our call would be for (PartnerRe) shareholders to accept this offer,” Amit Kumar, New York-based vice president and senior analyst of insurance at Macquarie Capital (USA) Inc., said in a note April 14 immediately after the offer.

He added “we would suggest investors take profits here with the stock trading at or near $130/share,” in a second note after Exor's investor call April 15.

There was, however, another side to the discussion.

“Our initial expectation is that (Axis) can preserve its deal by having (PartnerRe) pay a special dividend upon the closing of the (Axis) merger,” said Meyer Shields, managing director with Keefe, Bruyette & Woods Inc. in Baltimore, in a note after the Exor offer, adding that at year end 2014 PartnerRe held about $1.3 billion in cash and equivalents.

Exor was an original minority investor in PartnerRe when it was formed in 1993.