Exor stock price crashes 10% on the collapse of $9 billion reinsurance sale

Exor stock price crashes 10% on the collapse of $9 billion reinsurance sale
  • Exor announced that the sale of its reinsurance business to Covea fell through
  • FCA - controlled by Exor - suspends dividends for 2019, which is likely to cost Exor more than $340 million
  • Exor stock price fell 10% last week on the Covea news

Shares of Exor NV (BMV: EXO1N) crashed 10% last week after the proposed sale of the reinsurance business collapsed. Italy’s biggest company saw its stock price lose more than 50% of the value since the COVID-19 outbreak hit northern Italy. 

Fundamental analysis: Exor facing financial difficulties

Exor, the holding company of Italy’s Agnelli family, is struggling to raise cash after the sale of the “PartnerRE” reinsurance business to French insurer Covea fell through. Two companies previously agreed on a $9 billion deal, before Covea asked Exor to renegotiate the terms of the deal. 

This proposal was swiftly rejected by John Elkann, scion of the billionaire Agnelli clan, who decided to play the hardball and refuse to lower the asking price. Covea ultimately decided to walk away from the deal. 

“In attempting to renegotiate the agreed deal terms, Covea has never suggested the existence of a material adverse change, including pandemic risk, or any other issues at PartnerRe that would explain its refusal to honor its commitments under the MOU and Exor believes that no such basis exists,” Exor said in a statement. 

Elkann is also in charge of the negotiation process to merge Fiat Chrysler Automobiles NV – controlled by Exor – with its French counterpart Peugeot SA.

“The news is undoubtedly negative,” Equita SIM’s Martino De Ambroggi said.

“From a qualitative standpoint Exor shows that it does not need to sell and sends a clear message to those speculating on a possible revision of the merger with PSA terms, showing that it is not willing to change what agreed,” Mr. De Ambroggi said.

Covea’s withdrawal from the PartnerRE transaction arrives at the wrong moment for Elkann. As a result of the COVID-19 outbreak, Invezz reported last week that Fiat Chrysler Automobiles NV decided to suspend dividends for 2019, which is likely to cost Exor another more than $340 million.

Technical analysis: Exor stock price drops 10%

Following the series of negative headlines surrounding the Italian giant, shares of Exor fell 10% last week to hit the 7-week low near the 41.00 mark. The COVID-19 outbreak triggered a stock market crash in February and March, which wiped out more than 50% of Exor’s market value. 

Exor stock daily chart (TradingView)

On the downside, the 3-year low set in March will provide major support to buyers around the 35.00 handle. On the other hand, any recovery is likely to be capped by the 200-WMA, currently trading at 53.90.

Summary

Shares of Exor fell 10% last week after the French insurer Covea pulled out of the deal to buy Exor’s reinsurance business for $9 billion. Exor stock lost more than 50% of its value on the back of the stock market crash amid the COVID-19 outbreak. 

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