PartnerRe Ltd. PRE has finally chosen EXOR S.p.A. as its partner. Yesterday, the company agreed to be taken over by the Italian company, which is controlled by the affluent Agnelli family.
Per the agreement, EXOR will pay $140.50 for each share of PartnerRe. The per-share amount includes a special pre-closing dividend of $3.00 in addition to ordinary quarterly dividends through closing. The total transaction value comes to approximately $6.9 billion.
PartnerRe was also being chased by another bidder – AXIS Capital Holdings Limited AXS.
PartnerRe’s decision to sell itself to EXOR came after the latter sweetened its bid. EXOR’s first offer to acquire PartnerRe was made in Apr 2015. In May, EXOR offered PartnerRe a price of $130.00 per share for full ownership. EXOR’s revised offer appeared more lucrative and advantageous to PartnerRe in comparison to the AXIS bid.
Alongside the premium valuation, the most significant and obvious motivation is the all-cash offer from EXOR against the all-stock merger with AXIS. This not only provides additional liquidity to PartnerRe but also adds certainty since EXOR may not need to raise any additional capital to fund the acquisition.
Furthermore, the EXOR deal will help PartnerRe to retain its management and brand name. On EXOR’s part, the deal has been unanimously approved by its board, which will enable swifter processing of the transaction.
PartnerRe, which has been facing stiff challenges posed by the reinsurance industry, will now have a stronger partner. Nevertheless, PartnerRe has retained its flexibility by incorporating a “Go Shop” period clause in the agreement. This clause allows the company to actively solicit and evaluate better offers and enter into negotiations with proposals that it might receive before Sep 14, 2015.
Currently, PartnerRe carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include players like AmTrust Financial Services, Inc. AFSI and Arch Capital Group Ltd. ACGL. Both these stocks have a Zacks Rank #2 (Buy).
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