MILAN (Reuters) - Italian holding company Exor, which controls carmaker Fiat Chrysler Automobiles, offered $6.4 billion in cash to buy Bermuda-based reinsurer PartnerRe, trumping an all-share deal with Axis Capital Holdings Ltd.
Earlier this year, Axis and PartnerRe agreed on an $11 billion merger to create one of the world’s largest reinsurers in a deal that was expected to close in the second half of this year.
Reinsurers are being squeezed by price competition and weak demand from insurers for their products, and tie-ups seen for companies that lack global reach or specialized focus.
Exor, controlled by the Agnelli family, said in a statement on Tuesday it was offering $130 per PartnerRe share in what it said would be a friendly operation.
“Compared to the all-share combination with Axis, it provides PartnerRe shareholders with superior value and greater certainty since it is all cash, fully financed and does not require a capital increase by Exor,” the company said.
PartnerRe shares closed up 10.1 percent at $129.25.
PartnerRe said in a statement its board would review the Exor proposal to determine the course of action it believed to be in the best interests of the company and shareholders.
“The Board will announce its position regarding the Exor proposal following its review, which will be completed in due course,” it said.
Exor, which had a minority stake in PartnerRe when it was formed in 1993, said its offer represented a 16 percent premium to the implied value per share for PartnerRe under the Axis agreement.
PartnerRe, which has a market value of $5.65 billion, was the world’s 10th largest reinsurer, according to data compiled by credit rating agency Moody’s.
Reinsurers help insurers pay large damage claims, in exchange for part of the profit.
Exor, which also has stakes in tractor and truck maker CNH Industrial and real estate group Cushman & Wakefield, has been seeking to diversify its asset base for some time.
On Monday Exor head John Elkann, a scion of the Agnelli family, said the company was looking for opportunities in the service sector, with a special focus on financial services. In 2013 it sold a 15 percent stake in Swiss inspection company SGS for 2 billion euros.
Media reports last year said Exor was interested in Swiss reinsurer Swiss Re, though the reports were denied by both companies.
Exor, which has a market capitalization of around $11 billion, said it expected to close the deal with PartnerRe in 2015.
It said it would fund the acquisition through cash on hand as well as a bridge facility and term loan from Citibank and Morgan Stanley for up to $4.75 billion.
Earlier on Tuesday Exor said it had received several non-binding offers for Cushman & Wakefield, the sale of which could result in a big gain as rising property prices have boosted the value of companies in the sector.
Exor was advised by BDT & Company, Morgan Stanley and Citigroup.
Reporting by Stephen Jewkes. Editing by Jane Merriman, David Evans and Dan Grebler