Iexor's Reinsurer Sale Falls Through... Will Fiat-Peugeot Merger Also Be Affected?

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Due to the spread of the novel coronavirus infection (COVID-19), the sale of the reinsurer PartnerRe, which was being pursued by Exor, the holding company of the Italian automobile manufacturer Fiat Chrysler Automobiles (FCA), has fallen through, according to reports by the Wall Street Journal (WSJ) and others on the 12th (local time). Exor is also in the process of merging Fiat with the French automaker Peugeot Citro?n (PSA), so attention is focused on whether this failed sale will have an impact.

According to the reports, French insurance company Covea stated in a press release on the same day, "Considering the current unprecedented situation threatening the global economic outlook and significant uncertainty, we have informed Exor that we will not proceed with the acquisition of PartnerRe as originally planned." They explained that the withdrawal was due to increased uncertainty caused by COVID-19.

Exor and Covea had announced in March, during the early spread of COVID-19 in Europe, that they were negotiating over PartnerRe. Exor, which purchased PartnerRe in 2015 for $6.9 billion (approximately 8.45 trillion KRW), was attempting to sell it for $9 billion through this negotiation. Exor tried to renegotiate but ultimately withdrew, emphasizing a "positive outlook" for PartnerRe.

This is not the first time that mergers and acquisitions (M&A) negotiations have fallen through due to COVID-19. Earlier last month, Xerox, a copier and printer manufacturer, decided to halt its hostile takeover of PC maker HP citing economic uncertainty, and the U.S. private equity firm Sycamore Partners also withdrew its plan to acquire the lingerie brand Victoria's Secret. The WSJ explained regarding the failed PartnerRe sale that "the COVID-19 pandemic has disrupted the second-largest corporate deal of the year."

The reason this withdrawal is drawing attention is that the automakers Fiat and Peugeot are in the process of merging. Both parties announced the merger last December and stated they would complete the work within one to one and a half years. Given the expected sharp decline in sales due to COVID-19 and companies increasing their cash reserves in preparation for uncertainty, the market views the risk of withdrawal from negotiations as growing.

The WSJ reported, "Last week, Fiat and Peugeot said they would continue with the merger, but some analysts and investors are growing increasingly uncertain."

This content was produced with the assistance of AI translation services.