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Exor offers US$6.4 billion for PartnerRe to break up Axis deal

[NEW YORK] Exor SpA offered US$6.4 billion for PartnerRe, seeking to break up the reinsurer's planned merger with Axis Capital Holdings.

Exor, controlled by the Agnelli family, is offering US$130 a share in cash, the company said in a statement Tuesday, or 16 per cent above the implied value per share of Bermuda-based PartnerRe under the terms of the Axis agreement.

An Axis-PartnerRe combination would create the world's fifth-biggest property-and-casualty reinsurer, and was announced in January, the same month that XL Group Plc agreed to buy Catlin Group for about US$4 billion. Exor, the biggest investor in automaker Fiat Chrysler Automobiles, has been seeking opportunities in the finance industry after selling its stake in Geneva-based SGS for 2 billion euros (US$2.1 billion) in 2013, generating a capital gain of 1.53 billion euros.

"Our proposal provides superior value for PartnerRe shareholders with the certainty of a cash offer," John Elkann, Exor chairman and chief executive officer, said in a statement. "It also represents a great opportunity for the company's management and employees to continue to develop PartnerRe's outstanding potential as a leading global reinsurer with our committed and stable ownership."

PartnerRe jumped 8.7 per cent to US$129.45 at 12:04 p.m. in New York trading. Axis, also based in Bermuda, was unchanged. Exor rose 0.4 per cent at the close of trading in Milan, before the bid was announced.

Exor said it can pay with cash on hand and funds from a bridge facility and term loan from Citigroup and Morgan Stanley for as much as US$4.75 billion. The Turin, Italy-based company said it has invested in insurance for more than two decades, including in PartnerRe's formation in 1993. Axis's Linda Ventresca and Drew Brown, a spokesman for PartnerRe at Sard Verbinnen & Co, didn't immediately return calls seeking comment.

Reinsurers take on some of the largest risks from primary carriers and can offer specialised coverage to commercial clients in industries such as energy and aviation. Their margins have been pressured in recent years by pension funds and Wall Street investors seeking to take on insurance risks, including those tied to the weather, that aren't correlated with financial markets.

Axis and PartnerRe said when they announced their deal that it would create a company with a market value of about US$11 billion that would be able to offer more to clients and benefit from economies of scale. Analysts including Josh Shanker at Deutsche Bank AG and Charles Sebaski at BMO Capital Markets questioned whether the Axis agreement was favorable for PartnerRe.

PartnerRe investors "have a sound argument that the current deal terms do not maximise shareholder value," Mr Sebaski said in an April 8 note. The company's CEO, Costas Miranthis, stepped down when the deal was announced and Axis's Albert A Benchimol was chosen to lead the combined reinsurer.

Exor said it is best able to build PartnerRe by "focusing on its long-term prospects, better managing the volatility of the reinsurance cycle and proactively seizing market opportunities." Exor said its bankers on the deal were Byron Trott's BDT & Co, Citigroup and Morgan Stanley. Its legal advisers are Paul, Weiss, Rifkind, Wharton & Garrison; Cox Hallett Wilkinson; and Pedersoli e Associati.


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