Sale of Agnelli insurer PartnerRe to Covéa collapses

A planned $9bn acquisition of Bermuda reinsurer PartnerRe has collapsed after France’s Covéa said it was no longer willing to go ahead on the terms agreed in March with Italy’s Exor.

The failed deal marks one of the largest transactions to break down since the outbreak of the coronavirus pandemic, joining a list of collapsed transactions that ranges from lingerie chain Victoria’s Secret to the merger of two Boeing aircraft suppliers

It also represents a significant blow to Exor, the holding company controlled by Italy’s billionaire Agnelli family, which was expected to secure a lucrative windfall from selling the business it bought for $6.9bn in 2016

Reinsurers are expected to shoulder much of the burden from Covid-19-related claims. The insurance industry as a whole could end up paying out more than $100bn because of the outbreak. 

Privately held Covéa said in a statement on Tuesday that it did not intend to go ahead with the deal “on the terms originally envisaged” because of uncertainties in the global economic outlook. Multiple people on either side of the transaction told the FT the deal is all but dead just days after an attempt to negotiate a new price in light of the pandemic began last Friday.

Exor said that there was a “positive outlook” for PartnerRe and no reason to change the price. “In attempting to renegotiate the agreed deal terms, Covéa has never suggested the existence of a material adverse change, including pandemic risk,” the company said in a statement. 

The failure of the Franco-Italian transaction comes at a sensitive moment for Exor, which is in the process of trying to push through a planned merger of Fiat Chrysler Automobiles with France’s Peugeot. 

It is also a blow for Covéa and its chief executive, Thierry Derez. Covéa had looked for a big acquisition in reinsurance for years, and the Partner Re deal would have catapulted the France-focused mutual into the big leagues of global reinsurance.

It followed a failed hostile takeover bid for Paris-based reinsurer Scor in 2018, which was aggressively rebuffed and has led to numerous ongoing lawsuits. Scor has accused Covéa and Mr Derez of breach of trust. Covéa remains Scor’s largest shareholder, with 8.4 per cent.

Two people close to Exor said Covéa tried to renegotiate the price but Mr Elkann refused to budge on the terms of the deal. 

“John Elkann has been clear from the start. PartnerRe is a great business in a strong and resilient sector. So the agreed deal terms were not up for negotiation,” said one of the people, who complained about the behaviour of Covéa.

In an interview with the FT in March, Mr Derez justified the $9bn price tag by arguing that Exor had built up Partner’s life reinsurance business. However, people familiar with his thinking said the pandemic made him reassess the deal.

The memorandum of understanding signed on March 3, one month after the World Health Organisation declared a public health emergency of international concern, specifically excluded “a pandemic” as one of the reasons that would justify the parties from walking away from the deal, the people said.

Exor is currently weighing its options and might consider taking legal action against the French insurer, one person said. Exor declined to comment. The deal is not subject to a significant break-up fee, people close to both sides said.

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