Valentina Za and Giulio Piovaccari

MILAN (Reuters) –Exor, Italy’s holding company, signed a preliminary deal to sell PartnerRe reinsurance unit to French insurance firm Covea at $9 billion. The agreement was a result of the Coronavirus pandemic.

It is still the same price as last year. Covea had walked out on the purchase of Bermuda’s firm, saying it was unable to buy the company under the terms that were in place before COVID-19. Exor (OTC). refused to modify these terms.

Exor said that PartnerRe was one of the largest reinsurance companies in terms capital and liquidity and it wasn’t expected to be negatively affected by COVID.

Exor, Covea and a joint statement were made late Thursday night. They said they intended to sign a final agreement at the end the year. Completion is expected in mid–2022.

Exor, based upon the disposition, will pocket around $3.2B in capital gains from PartnerRE, which it purchased in 2016 at $6.7B, after taking into account dividends and other payments by the reinsurer.

It further increases its ability to acquire future acquisitions. The current total of around 3 Billion Euros (€3.5 Billion) is up to 2023.

Equita, Milan’s broker calculated that Exor’s net assets increased by 5% following the transaction. This compared to Exor’s debt of 3.1 million euros.

Exor’s shares rose by 2.5% last Friday in spite of a negative Milan market.

EXOR’S SOPTIONS

Exor is the single biggest shareholder of carmaker Stellantis, and also the parent company to companies like Ferrari (NYSES:), CNH Industrial(NYSE:) and Juventus soccer club. Exor made its debut in luxury goods and services.

The company became the biggest shareholder in Chinese luxury chain Shang Xia in 2013, cofounded by France’s Hermes. It also acquired a 24% share in Louboutin high-end shoesmaker Louboutin in March for 540 million euro.

Martino De Ambroggi, an Equita analyst said that Exor might use the proceeds of the transaction to diversify further into luxury sectors. He also mentioned a extraordinary dividend or a buyback option as options.

PartnerRe received $9 billion in cash as consideration. The companies added that preferred shares not listed in New York were not part the purchase.

The statement stated that PartnerRe’s acquisition is in line with Covea’s long-term strategy of anticipating the changes to the global insurance market through international growth, diversification of products and risks, and the creation of new geographies.

Covea, after the 2020 deal fell apart, agreed to invest 1.5 million euros in entities controlled by PartnerRE, and in unidentified investments related Exor in an effort to restore normal relations between the companies.

Covea claimed that Exor, PartnerRe, and Covea’s investment cooperation agreements had allowed it to get to know PartnerRe better and appreciated its management.

Exor and Covea continue to collaborate, with Exor purchasing from Covea interest in Special Purpose Reinsurance Vehicles managed by PartnerRe. This will amount to approximately $725 Million.

The vehicles can be used to invest in short-tail reinsurance contracts such as property catastrophe or other short-tail reinsurance policies underwritten by PartnerRe.

Exor, PartnerRe, and Covea continue to collectively invest in Exor funds. ($1 = 0.8560 euros)