PartnerRe to Acquire ParisRe

On Monday, PartnerRe Ltd. (PRE - Analyst Report) announced that it will acquire the remaining shares of ParisRe Holdings Limited through a merger in lieu of the stock-for-stock transaction agreed upon earlier.

By choosing a merger vote instead of an exchange offer, the amended structure is expected to accelerate PartnerRe’s acquisition of ParisRe. However, the consideration granted to ParisRe shareholders will remain unchanged.

PartnerRe has entered into agreements to acquire 77%, and previously acquired approximately 6%, of ParisRe’s outstanding common shares. In these transactions, PartnerRe offered (subject to certain adjustments) the same exchange ratio of 0.30 PartnerRe common shares for each ParisRe common share. The closing of the 77% block purchase is currently expected to occur in Oct. 2009, subject to certain conditions and regulatory approvals.

Shareholder approvals from both the companies in connection with the closing of the 77% block purchase have been obtained. As a result, PartnerRe will hold 83% of ParisRe’s outstanding common shares.

Following the closing of the block purchase, ParisRe has agreed to call a meeting of its shareholders to vote on a proposal to effect a merger, governed by Swiss law, of ParisRe into a wholly-owned subsidiary of PartnerRe. The merger, when approved by the holders of at least 90% of all outstanding ParisRe voting rights, is expected to become effective in December 2009.

PartnerRe intends to obtain a listing for its shares on the Euronext Paris stock exchange, which will be effective upon completion of the merger. PartnerRe will also seek to implement measures to enhance shareholders’ access to liquidity including through the New York Stock Exchange.

Upon successful completion of the merger, ParisRe, together with its operating subsidiaries, will be fully integrated into PartnerRe’s existing operating structure. The acquisition will strengthen PartnerRe’s balance sheet and financial flexibility by creating a greater market presence, risk diversification, capital strength and scale in the face of uncertain and volatile financial and reinsurance markets.

As such, we maintain our Outperform recommendation on PartnerRe.