PartnerRe sale to Covéa called off, as Covid-19 renegotiations fail

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The sale of global reinsurance company PartnerRe to French insurance group Covéa has been called off, after attempted renegotiations over the price with seller EXOR in the wake of the Covid-19 pandemic failed to find an agreement.

covea-partnerre-exor-logosCovéa was set to acquire reinsurance firm PartnerRe from owner EXOR, the Italian holding company and investment entity of the Fiat owning Agnelli family for $9 billion, in a deal announced just prior to the global pandemic outbreak worsening at the beginning of March.

The sale would have netted EXOR a very healthy return on its investment in the reinsurance industry, as it represented a roughly 30% profit on the $6.9 billion that Exor paid for PartnerRe in 2016.

But now the deal has fallen apart, after the buyer and seller failed to agree on a renegotiation over the price.

Covéa had wanted to renegotiate the price in the wake of the Covid-19 pandemic it appears, but EXOR stuck by the original sale price and has said that it would not accept anything lower given PartnerRe was not set to suffer serious impacts.

The Board of EXOR seemingly didn’t want to re-enter any negotiation process, saying that it was abandoning the deal because of Covéa’s refusal to finalise the acquisition agreement for PartnerRe.

The Board of EXOR, which met under the Chairmanship of John Elkann, acknowledged notification from Covéa that it “will not honour its commitment to acquire PartnerRe in accordance with the terms of the Memorandum of Understanding (“MOU”) announced on March 3, 2020,” the Italian holding group announced.

Covea blamed the new economic conditions that the world now finds itself in following the Covid-19 pandemic outbreak, saying that it now could not complete the PartnerRe deal at the original terms.

Covea said, “In light of the current unprecedented conditions and significant uncertainties threatening the global economic outlook, Covéa has indicated to Exor that the context does not allow the contemplated acquisition of Partner Re to be carried out on the terms initially envisaged.”

EXOR’s Board highlighted the positive rating outlook that reinsurance firm PartnerRe has, as well as its capital and liquidity ratio which they explained is one of the highest in the global reinsurance sector.

PartnerRe’s ratios are not expected to be significantly impacted by the Covid-19 pandemic, the Board said, reiterating that any sale of PartnerRe at inferior terms was not a true reflection of the value in the company.

“In attempting to renegotiate the agreed deal terms, Covéa has never suggested the existence of a material adverse change, including pandemic risk, or any other issues at PartnerRe that would explain its refusal to honor its commitments under the MOU and Exor believes that no such basis exists,” EXOR’s Board said.

It’s understood that Covea had been trrying to renegotiate the acquisition price for PartnerRe down from the $9 billion proposed sale mark for some weeks as the pandemic took hold, but that EXOR wouldn’t agree to this.

The collapse of the acquisition is a blow for all sides.

For Covéa, which has been seeking a reinsurance operation for some time and had set on PartnerRe given its global and line of business diversified operations would have been an ideal fit for the firm.

For EXOR, which would have recognised a very health cash boost that would have been welcome at this time of stress across its investment and holding portfolio.

For PartnerRe as well, which would have benefited from becoming part of a larger global franchise with primary insurance access as well.

It’s been reported that EXOR may consider legal action, but that would seem an unlikely way to get the deal back on the table, so at this stage it appears to be off for good.

Could another suitor appear with a desire to acquire PartnerRe?

EXOR doesn’t really need to sell, unless the price is right, so it seems if any other company wanted to buy the reinsurance firm they would need to be at, or close to, the original price agreed with Covea.

In the current climate, where insurance and reinsurance players are threatened by losses and uncertainty due to Covid-19, while the pandemic also threatens to reshape global commerce and finance, as well as ways of working, there is considerable uncertainty that may put off any suitor coming to the fore at this time.

Plus, it seems likely any comparable reinsurer in the industry would look to acquire PartnerRe at a much lower price, given the costs of integration and overlaps in business model. So unless another Covea comes along, PartnerRe looks set to continue as the independently owned global reinsurance underwriter it is today.

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