PartnerRe rejects $6.4bn offer from Exor

PartnerRe, the US-listed reinsurance group, rejected an unsolicited $6.4bn takeover offer by Exor, the investment company of Italy's Agnelli family, and instead enhanced the terms of its planned merger with rival reinsurer Axis Capital.

The company said the decision came following extensive talks in recent weeks with Exor for which it had obtained a waiver from Axis Capital.

PartnerRe reaffirmed on Monday its plans to pursue an all-share merger with Axis Capital and sought to soften any blowback from its shareholders by declaring a special dividend of $545m, or $11.50 per share, before the closing of their deal.

PartnerRe said Exor was unwilling to budge on its $130 a share cash offer, which the reinsurer argued undervalued the business. The rejection sets the stage for a potential hostile offer made directly to PartnerRe's shareholders by Exor, which declined to comment.

PartnerRe chairman, Jean-Paul Montupet, said: "Throughout these discussions, Exor made it abundantly clear that it was not willing to adjust its price. The board concluded that Exor's proposal significantly undervalued PartnerRe and that there was no prospect of the offer leading to a superior proposal."

The unsolicited bid from Exor in April came months after directors of Axis and PartnerRe, which is based in Bermuda, agreed to a nil-premium merger that would create a new S&P 500 company and the world's fifth-largest property and casualty reinsurer. The combined group would have an investment portfolio of $33bn and generate about $2.5bn of premium income from specialist insurance policies.

PartnerRe and Axis have said that they plan to cut at least $200m in costs within two years of the deal. PartnerRe would have also had to pay a "break fee" of $250m to Axis if it agreed to Exor's proposal.

Directors at PartnerRe opposed giving away control of the reinsurer easily to Exor, believing that the cash offer failed to account for the value created by its planned merger with Axis, said one person close to PartnerRe.

PartnerRe also expressed concerns about Exor's ability to manage a large reinsurer, this person said, adding that the company would be open to evaluating a new offer provided it was significantly higher.

PartnerRe's move to add a special dividend is likely intended to weaken any potential criticism of its rejection from its shareholders.

Peter Langerman, chief executive of Franklin Mutual Advisers, one of the largest investors in PartnerRe, told Reuters in April that he preferred the Exor offer over the proposed merger with Axis.

The takeover battle is the latest in a tide of dealmaking sweeping the reinsurance industry, which allows insurance companies to transfer the risks of hurricanes, earthquakes and other disasters. Intense competition has pushed premiums in important areas of reinsurance to their lowest levels in years, encouraging underwriters to consolidate.

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