French mutual insurer Covéa has signed a memorandum of understanding (MoU) to acquire Exor’s wholly owned reinsurance unit PartnerRe for a cash consideration of $9bn.
This proposed deal is subject to the consultation of Covéa workers councils.
The firms intend to sign a final sale agreement by the end of this year and to close the deal in mid-2022.
The cash consideration will be paid by Covéa on completion of the deal based on a consolidated common shareholders’ equity value of $7bn.
This proposed deal will not include the preferred shares issued by PartnerRe and listed on the NYSE.
The negotiations for the transaction collapsed in May 2020 when Exor rejected a request by Covéa seeking for discount because of the “significant uncertainties threatening the global economic outlook.”
Exor is a diversified holding company controlled by the Agnelli family, which founded Fiat about 125 years ago. The family owns 53% of the holding company.
Besides being the largest investor in Stellantis, Exor controls Ferrari NV, The Economist Group and the Juventus soccer team.
With this acquisition, Covea plans to expand beyond home, auto, life and health insurance segments.
Several insurers and reinsurers are facing pressure from low to negative interest rates and are looking at acquisitions to bolster revenues.
After the completion of the deal, Exor and Covéa envisage to continue their reinsurance cooperation, with Exor buying from Covéa interests in special purpose reinsurance vehicles managed by PartnerRe for around $725m.
These vehicles will invest in property catastrophe and other short-tail reinsurance contracts underwritten by PartnerRe.
Covéa, Exor and PartnerRe would also jointly invest in Exor-managed funds.
Commenting on the deal, Exor chairman and CEO John Elkann said: “The cooperation agreement signed in the summer of 2020 with Covéa has been positive in many ways and has contributed to a strong level of mutual trust between our companies. Also, thanks to Jacques Bonneau’s leadership and the excellent work of his team, PartnerRe has further improved its performance and strengthened its distinctive capabilities. Together, these have created a new opportunity to significantly reinforce PartnerRe’s development as a global reinsurance company.”
Covéa chairman and CEO Thierry Derez said: “Our proposed transaction comes at the right time with the insurance sector undergoing a fundamental transformation. It fits perfectly with Covéa’s growth and diversification strategy, our ability to adapt and to bring together complementary expertise, extend our geographic reach and manage risks on a global basis. It would further strengthen the excellent prospects for PartnerRe and for our Group, serving the interests of our members and clients, as well as those of our employees and partners.”