Update: PartnerRe Says $6.8B EXOR Offer Unacceptable; Open to Negotiations

May 20, 2015 by Sonali Basak and Tommaso Ebhardt

PartnerRe Ltd. said it would engage in discussions with hostile bidder EXOR SpA to seek a better offer than the $6.8 billion proposal that the target company called “unacceptable.”

“While we believe that PartnerRe is worth materially more than EXOR has offered and the terms they have proposed are deficient, we stand ready to negotiate,” Jean-Paul Montupet, chairman of Bermuda-based PartnerRe, said in a statement Wednesday.

Montupet’s remarks reflect a shift for PartnerRe, which had repeated its commitment for weeks to complete a merger agreement with AXIS Capital Holdings Ltd. to form the world’s fifth- largest property-and-casualty reinsurer. Italy’s EXOR, led by the Agnelli family, has made two unsolicited bids as the investment firm seeks to diversify beyond industrial companies such as Fiat Chrysler Automobiles NV.

PartnerRe has obtained a waiver from AXIS allowing for direct engagement with EXOR, according to Wednesday’s statement. EXOR Chairman John Elkann said last week that the $6.8 billion proposal, for $137.50 a share, was its final offer. An EXOR spokesman declined to comment Wednesday.

EXOR rose 1.8 percent to 44.61 euros at 5:17 p.m. in Milan. PartnerRe was little changed at $134.11 in New York. AXIS climbed 0.5 percent to $56.18. A spokesman for AXIS didn’t return a message seeking comment.

Under the AXIS agreement, PartnerRe shareholders would be entitled to about 51.5 percent of a combined company. A revised AXIS deal, made after EXOR’s April 14 offer, also provided for a special dividend of $11.50 a share to PartnerRe investors.

The revised agreement valued PartnerRe at about $126 a share, based on Bermuda-based AXIS’ May 1 closing price of $52.33. AXIS said that joining companies would save costs and allow investors to benefit from a diversified insurer.

The PartnerRe agreement was the product of a “flawed process” that failed to explore alternatives, EXOR said in a May 4 statement. When EXOR increased its offer on May 12, the company said it had acquired a PartnerRe stake of more than 9 and would encourage PartnerRe shareholders to reject an AXIS transaction.

“Although we were disappointed that EXOR has made misleading statements regarding our prior discussions, we are interested in a proposal that may lead to superior value,” PartnerRe’s Montupet said.

In addition to a higher price, PartnerRe is seeking assurances that EXOR can complete a deal and protection if an eventual agreement collapses, according to two people with knowledge of the target company’s planning. A transaction could be reviewed by regulators in jurisdictions including the U.S., U.K., Hong Kong and Ireland, said one of the people, who asked not to be identified because the discussions were private.

PartnerRe is being led by interim Chief Executive Officer David Zwiener after the departure of Costas Miranthis on the day the AXIS deal was announced in January. The breakup fee for the AXIS-PartnerRe deal is $280 million, according to a May 7 regulatory filing.

Reinsurers have been seeking merger partners amid competition from pension and hedge funds that have been pursuing weather-related bets that aren’t correlated with bond and stock markets. Elkann has said that private ownership would help PartnerRe endure the cycles of the reinsurance market.

–With assistance from Doni Bloomfield in New York.

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