Reinsurer PartnerRe to acquire smaller rival Paris Re in cash, stock deal worth $2 billion

PartnerRe to acquire Paris Re in $2 billion deal

Reinsurer PartnerRe Ltd. said Sunday it will acquire Swiss rival Paris Re in a cash and stock deal worth roughly $2 billion.

Under terms of the transaction, Bermuda-based PartnerRe will swap 0.30 of its common shares for each Paris Re common share, acquiring 57 percent of Paris Re’s outstanding common stock in the process. PartnerRe recently acquired 6 percent of Paris Re’s shares at the same exchange ratio.

PartnerRe said the block purchase is expected to occur in the fourth quarter. Afterward, PartnerRe will make a voluntary exchange offer for remaining shares at the same price. That offer is expected to close in the first quarter of 2010.

PartnerRe said the stock deal should add $1.7 billion in new shareholder equity to the company. Paris Re also plans to subsequently distribute $310 million in cash, or $3.85 per common share, to its shareholders in a special dividend.

Patrick Thiele, president and CEO of PartnerRe, said the deal will “provide more balance and stability to our company in the face of uncertain and volatile financial and reinsurance markets.”

The property & casualty sector has seen hefty investment losses in the past year due to substantial volatility in financial markets, on top of paying out large claims in 2008 in the wake of Hurricane Ike.

PartnerRe provides property, casualty and other kinds of reinsurance, as well as weather and credit protection, to primary insurers, financial and industrial companies. For the year ended Dec. 31, the company reported total revenue of $4 billion. At March 31, total assets were $16.3 billion.

Paris Re was created by a consortium of private equity funds led by Stone Point Capital LLC, which in 2006 agreed to purchase AXA Re and merge it with the Zug, Switzerland-based company. For the year ended Dec. 31, 2008, the company reported revenue of $1.40 billion. At March 31, total assets were $6.75 billion.

Greenhill & Co. LLC and UBS Investment Bank served as financial advisers and Davis Polk & Wardwell LLP provided legal counsel to PartnerRe.

PartnerRe shares closed at $64.40 on Thursday ahead of the holiday weekend. The stock is down about 16 percent from its 52-week high of $76.96 reached last fall ahead of the market meltdown.