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PartnerRe sells shares to EXOR for US$6.9 bln; cancels merger with Axis for US$315 mln

Source: Asia Insurance Review | Sep 2015

Global reinsurer PartnerRe has reached a definitive agreement with Turin-headquartered EXOR under which the Italian investment firm will acquire all of the outstanding common shares of PartnerRe for approximately US$6.9 billion, all in cash. 
   The deal, which ended months of intense negotiations, terminated Partner Re’s amalgamation agreement with AXIS Capital Holdings, a Bermuda-based specialty insurer and reinsurer. Accordingly, AXIS Capital will receive US$315 million in termination fees from PartnerRe.
   The deal with EXOR represents a selling price of US$140.50 per share, including a special pre-closing dividend of US$3.00 per share. The agreement is not subject to due diligence and is not conditioned on financing.
   PartnerRe Chairman, Jean-Paul Montupet, said: “We are pleased to reach this agreement with EXOR, which we believe is in the best interest of our shareholders. Since EXOR made its initial offer to acquire the company in April 2015, the PartnerRe Board has been focused on maximising value for our shareholders while positioning PartnerRe for long-term success.
   “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. Importantly, EXOR is committed to ensuring that the unique culture, brand and business that our dedicated employees have successfully built over the past 20 years remain intact.”
Background to sale 
Over the past three years, the PartnerRe Board has carefully analysed the challenges facing the reinsurance industry. During this time, the PartnerRe Board and management team actively considered various strategic options and a range of potential transactions, ultimately leading to the amalgamation agreement announced on 25 January 2015 with AXIS Capital.
   Since then, and following EXOR’s initial proposal in April 2015, the PartnerRe Board has managed to negotiate significant enhancements to EXOR’s initial proposal, including:
• An aggregate increase in cash consideration of US$10.50 per common share.
• Significant potential enhancements to the terms of the preferred shares. 
• Material improvements to the terms of EXOR agreement designed to deliver greater closing certainty for PartnerRe shareholders, including a partial reimbursement of the AXIS Capital termination fees of US$225 million if EXOR fails to obtain required transaction approvals within one year or if there are other non-appealable legal prohibitions to closing, commitments from parties required to make regulatory filings and a full guarantee of payment and certain other matters from EXOR’s parent company. 
• A “Go Shop” provision that allows PartnerRe to solicit potentially superior proposals prior to 14 September 2015. However, there can be no assurance that this process will result in a superior proposal.
   After consultations with legal counsel and financial advisers, the Boards of Directors of both PartnerRe and EXOR unanimously approved the transaction. The deal is expected to close in the first quarter of 2016, subject to approval by PartnerRe shareholders, regulatory clearances and other customary closing conditions.
   PartnerRe headquarters will continue to be located in Bermuda, and it will have a strategic presence on five continents in 39 distinct geographic locations worldwide.
AXIS Capital’s response
Commenting on the termination of the merger agreement with PartnerRe, Mr Michael A Butt, AXIS Capital Chairman, said in a statement: “Prior to PartnerRe reaching out to us last December to discuss a combination of our companies, we were confident in continuing with our strategy as a standalone company, building our three strong businesses incrementally. We will now proceed with that strategy, with strengthened resolve. We have been very conscious of our responsibilities to our shareholders throughout these negotiations and believe we have demonstrated prudence and financial discipline in our approach.”
   Mr Albert Benchimol, President and CEO of AXIS Capital, said: “Our proposed transaction with PartnerRe stood to create a powerful mix of two financially strong and independent companies with compelling insurance/reinsurance franchises. While I am disappointed that the merger will not proceed, I have no doubt that the best days for AXIS Capital, our employees, clients, brokers and shareholders lie ahead.”
   In tandem with the announcement, AXIS Capital has reinstated its share repurchase programme, which has US$749 million remaining under the Board’s current authorisation through 31 December 2016. As part of this programme, a US$300-million accelerated share repurchase of the company’s stock is expected to begin soon and should be completed by 31 December 2015.
   AXIS Capital’s three diversified businesses are specialty insurance, reinsurance, and accident and health insurance.
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