Preferential treatment

7 July 2015 By Antony Currie Follow @AntonyMCurrie

Family scion John Elkann is offering his quarry’s preferred shareholders a higher dividend and a pledge to restrict payouts to his own Exor. That should curb fears of Fiat or other group holdings hurting reinsurer PartnerRe’s credit – if investors take Elkann’s word as his bond.

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Exor, the holding company for businesses owned by the Agnelli family, on July 7 improved its hostile offer for PartnerRe. The Bermudan reinsurer is currently pursuing an agreed deal with Axis Capital.

Exor has offered to increase the price paid to common shareholders by the amount of the breakup fee that PartnerRe has agreed to pay Axis if the deal falls through. That would raise Exor’s offer to $143.89 a share from $137.50, but only if PartnerRe can avoid paying the breakup fee. Exor is also offering a go-shop provision that would give PartnerRe until the end of August to find a higher offer.

In addition, Exor has offered to exchange all preferred stock for new preferreds. These would offer an extra 1 percentage point of yield as well as a guarantee not to buy back any preferred stock before January 2021. Exor also would commit to distribute no more than 67 percent of earnings to common shareholders for the next five years.

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